TEST BANK for College Accounting, Chapters 1-27, 22nd Edition. James Heintz, Robert Parry by digitaldownload87

College Accounting, Chapters 1-27, 22e James Heintz, Robert Parry (Test Bank All Chapters, 100% Original Verified, A+ Grade) Chapter 1—Introduction to Accounting 1. The purpose of accounting is to provide financial information about the current operations and financial conditions of a business to individuals and organizations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.01 - LO 1-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. Since financial information is communicated in accounting terms, accounting is said to be the "language of business." a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.01 - LO 1-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. Interpreting refers to reviewing events that have taken place and determining how they affect a business. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.02 - LO 1-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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4. A partnership is owned by stockholders or shareholders and is managed by them. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.04 - LO 1-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-03-Business Forms KEYWORDS: Bloom's: Understanding NOTES: 1 min. 5. A business that makes a product to sell is called a manufacturing business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.05 - LO 1-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-03-Business Forms KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. A public accountant can achieve professional recognition as a Certified Public Accountant by meeting certain educational and experience requirements as determined by each state. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.06 - LO 1-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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7. The six major steps of the accounting process are analyzing, recording, classifying, summarizing, reporting, and interpreting. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.02 - LO 1-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. Generally accepted accounting principles are procedures and guidelines to be followed in the accounting/reporting process. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.03 - LO 1-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. Accountants design accounting information systems and analyze and interpret information. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.06 - LO 1-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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10. Writing or using one of the latest technological advances to enter a transaction in the accounting records is called summarizing. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.02 - LO 1-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. The Financial Accounting Standards Board develops generally accepted accounting principles to provide some assurance that companies are reporting business activities in a similar manner. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.03 - LO 1-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. Stockholders may have very little influence on business decisions. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.04 - LO 1-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-03-Business Forms KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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13. Cost accounting is used to develop a financial plan for a company. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.06 - LO 1-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. The principal accounting officer of a company is called a public accountant. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.06 - LO 1-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Understanding NOTES: 1 min. 15. A CMA is a Certified Marketing Auditor. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.06 - LO 1-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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16. Which of the following types of businesses is owned by stockholders? a. proprietorship b. corporation c. partnership with more than ten partners d. partnership with only two partners ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.04 - LO 1-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-03-Business Forms KEYWORDS: Bloom's: Understanding NOTES: 1 min. 17. A business that purchases a product from another business to sell to customers is called a a. service business. b. manufacturing business. c. merchandising business. d. nonprofit business. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.05 - LO 1-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-03-Business Forms KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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18. A person who reviews the operating and accounting control procedures adopted by management to make sure the controls are adequate and are being followed may be referred to as a(n) a. bookkeeper. b. accountant. c. information processor. d. internal auditor. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.06 - LO 1-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Remembering NOTES: 1 min. 19. Since financial information is communicated in accounting terms and is the eyes and ears of management, accounting is said to be a. the language of business. b. public. c. private. d. nonprofit. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.01 - LO 1-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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20. A corporation is usually managed by a. stockholders. b. a professional manager. c. a proprietor. d. two or more partners. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.04 - LO 1-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-03-Business Forms KEYWORDS: Bloom's: Understanding NOTES: 1 min. 21. A person who records, sorts, and files accounting information in accounting records may be referred to as a(n) a. budgeter. b. journalist. c. accounting clerk. d. scribe. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.06 - LO 1-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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22. An internal auditor can achieve professional recognition in internal auditing by receiving which of the following certificates? a. GAAP b. CIA c. CMA d. CLU ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.06 - LO 1-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Understanding NOTES: 1 min. 23. The accounting function of classifying is a. thinking about how events affect the business. b. gathering similar events to provide information that is easy to understand. c. sorting and grouping similar items together. d. deciding the meaning and importance of the information in various reports. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.02 - LO 1-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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24. Bringing together various items of information to determine or explain a result is a. summarizing. b. interpreting. c. recording. d. classifying. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.02 - LO 1-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Remembering NOTES: 1 min. 25. Examining a transaction or event to determine its fundamental significance to the business so that the relevant information may be properly processed is called a. recording. b. analyzing. c. classifying. d. interpreting. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.02 - LO 1-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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26. Which of the following does NOT use nonprofit accounting guidelines and procedures? a. proprietorships b. hospitals c. educational institutions d. churches ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.06 - LO 1-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-03-Business Forms KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. Cost accountants provide a wide variety of services including a. designing and implementing accounting information systems. b. auditing reviews. c. performing general accounting services. d. analyzing the cost effectiveness of products produced and services provided. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.06 - LO 1-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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28. Public accountants do NOT offer which of the following services? a. auditing b. tax preparation c. management consulting d. marketing analysis ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.06 - LO 1-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. Looking at events that have taken place and thinking about how they affect a business is called ____________________. ANSWER: analyzing POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.02 - LO 1-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Understanding NOTES: 1 min. 30. One who assumes all risks for the business and whose personal assets can be taken to pay creditors is called a(n) ____________________. ANSWER:

sole proprietor owner partner POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.04 - LO 1-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-03-Business Forms KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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31. Rules that businesses must follow when preparing financial statements are called ____________________. ANSWER:

generally accepted accounting principles GAAP POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.03 - LO 1-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Understanding NOTES: 1 min. 32. The accountant who oversees the entire accounting process and is the principal accounting officer of the company is called the ____________________. ANSWER: controller POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.06 - LO 1-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. A business that buys a product from another business to sell to customers is called a(n) ____________________ business. ANSWER: merchandising POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.05 - LO 1-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-03-Business Forms KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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34. Entering financial information about events affecting the company into the accounting system is called ____________________. ANSWER: recording POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.02 - LO 1-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. ____________________ design the accounting information system and focus on analyzing and interpreting information by studying the impact of alternative decisions. ANSWER: Accountants POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.06 - LO 1-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Understanding NOTES: 1 min. 36. The owners of a corporation are called ____________________. ANSWER:

stockholders shareholders POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.04 - LO 1-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-03-Business Forms KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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37. ____________________ is the aggregation of many similar events to provide information that is easy to understand. ANSWER: Summarizing POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.02 - LO 1-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Understanding NOTES: 1 min. 38. ____________________ is the process by which accountants help managers develop a financial plan. ANSWER: Budgeting POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.06 - LO 1-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Understanding NOTES: 1 min. 39. A business that makes a product to sell is called a(n) ____________________ business. ANSWER: manufacturing POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.05 - LO 1-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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40. ____________________ includes preparing various reports and financial statements and analyzing operating, investing, and financing decisions. ANSWER: Financial accounting POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.06 - LO 1-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Understanding 41. ____________________ involves the application of standard review and testing procedures to be certain that proper accounting policies and practices have been followed. ANSWER: Auditing POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.06 - LO 1-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Understanding NOTES: 1 min. 42. A(n) ____________________ is owned by two or more people who assume the risks for the business and whose assets may be taken to pay creditors. ANSWER: partnership POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.04 - LO 1-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-03-Business Forms KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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43. ____________________ is deciding the meaning and importance in various reports, which may include ratio analysis to help explain how pieces of information relate to one another. ANSWER: Interpreting POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.02 - LO 1-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose KEYWORDS: Bloom's: Understanding NOTES: 1 min. Match the terms with the definitions. a. accountant b. accounting c. accounting clerk d. analyzing e. auditing f. bookkeeper g. budgeting h. Certified Public Accountant i. classifying j. controller k. corporation l. cost accounting m. financial accounting n. generally accepted accounting principles o. internal auditing p. interpreting q. manufacturing business r. merchandising business s. para-accountant t. partnership u. recording v. reporting w. service business x. sole proprietorship y. summarizing z. tax accounting DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.02 - LO 1-2

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COLL.HEIN.17.03 - LO 1-3 COLL.HEIN.17.04 - LO 1-4 COLL.HEIN.17.05 - LO 1-5 COLL.HEIN.17.06 - LO 1-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-01-Purpose ACBSP: APC-02-GAAP ACBSP: APC-03-Business Forms KEYWORDS: Bloom's: Remembering | Bloom's: Understanding NOTES: 7 min. 44. Looking at events that have taken place and thinking about how they affect the business. ANSWER: d POINTS: 1 45. Specializes in cash, payroll, accounts receivable, accounts payable, inventory, or purchases. ANSWER: c POINTS: 1 46. A business that buys a product from another business to sell to customers. ANSWER: r POINTS: 1 47. Reviewing the operating and accounting control procedures adopted by management to make sure the controls are adequate and being followed; assuring that accurate and timely information is provided. ANSWER: o POINTS: 1 48. Deciding the meaning and importance of the information in various reports. ANSWER: p POINTS: 1 49. The rules that businesses must follow when preparing financial statements. ANSWER: n POINTS: 1 50. Includes preparing various reports and financial statements and analyzing operating, investing, and financing decisions. ANSWER: m POINTS: 1 51. Determining the cost of producing specific products or providing services and analyzing for cost effectiveness. ANSWER: l POINTS: 1

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52. A type of ownership structure in which there are many owners who usually employ professional managers. ANSWER: k POINTS: 1 53. Sorting and grouping similar items together rather than merely keeping a simple, diary-like record of numerous events. ANSWER: i POINTS: 1 54. The process in which accountants help managers develop a financial plan. ANSWER: g POINTS: 1 55. Reviewing and testing to be certain that proper accounting policies and practices have been followed. ANSWER: e POINTS: 1 56. A system of gathering financial information about a business and reporting this information to users. ANSWER: b POINTS: 1 57. A type of ownership structure in which one person owns the business. ANSWER: x POINTS: 1 58. A business that provides a service. ANSWER: w POINTS: 1 59. Bringing various items of information together to determine a result. ANSWER: y POINTS: 1 60. Entering financial information about events affecting the company into the accounting system. ANSWER: u POINTS: 1 61. A type of ownership structure in which more than one person owns the business. ANSWER: t POINTS: 1 62. Telling the results of the financial information. ANSWER: v POINTS: 1

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63. A business that makes products to sell. ANSWER: q POINTS: 1 64. Focusing on tax planning, preparing tax returns, and dealing with the Internal Revenue Service and other governmental agencies. ANSWER: z POINTS: 1 65. Generally supervises the work of accounting clerks, helps with daily accounting work, and summarizes accounting information. ANSWER: f POINTS: 1

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Chapter 2—Analyzing Transactions: The Accounting Equation 1. A business entity is an individual, association, or organization with control over economic resources and which engages in economic activities. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.1 - LO: 2-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-03-Business Forms KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. Liabilities represent an "inside" interest in a business. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.1 - LO: 2-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-03-Business Forms KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. The accounting equation shows the relationship among the three basic accounting elements—assets, expenses, and owner's equity. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.2 - LO: 2-2 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 4. If owner's equity and liabilities increased during the period, then assets must also have increased. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.2 - LO: 2-2 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. An accounts payable is an unwritten promise to pay a supplier for assets purchased or services rendered. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.1 - LO: 2-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. If the revenue of a period exceeds the expenses, the excess represents a net loss. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.3 - LO: 2-5 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Evaluating NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 7. Any accounting period of twelve months' duration is usually referred to as a fiscal year. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.3 - LO: 2-5 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. Revenues received during an accounting period increase owner's equity. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. Since supplies last for several months, they are recorded as assets. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 10. Since insurance lasts for several months, it is recorded as owner's equity. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. The income statement provides information about events over a period of a month, year, or other period of time. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.3 - LO: 2-5 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. The terms "profit and loss statement" or "operating statement" are sometimes used as synonyms for the balance sheet. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.3 - LO: 2-5 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 13. Other terms used for owner's equity include net worth and capital. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.1 - LO: 2-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. Any item a business owns that will provide future benefits is called owner's equity. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.1 - LO: 2-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. It is not necessary to measure a business transaction in dollars. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.5 - LO: 2-3 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 16. The accounting equation may be expressed as assets − liabilities = owner's equity. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.2 - LO: 2-2 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. According to the business entity concept, a proprietor may include nonbusiness assets and liabilities in the business entity's accounting records. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.1 - LO: 2-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. Recognizing the effects of transactions on assets, liabilities, owner's equity, revenue, and expenses of a business is the processing function. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.6 - LO: 2-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 19. Expenses represent a decrease in liabilities. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. Expenses that are incurred in operating the enterprise increase owner's equity. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Understanding NOTES: 1 min. 21. Withdrawing cash from a business entity will result in an increase in owner's equity. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 22. An increase in a revenue account may also result in an increase in the accounts receivable account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Understanding NOTES: 1 min. 23. Financial statements commonly prepared by businesses include an income statement, a statement of owner's equity, and a balance sheet. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.3 - LO: 2-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. The statement of owner's equity shows the state of the business on a specific date. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.3 - LO: 2-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 25. The balance sheet reports assets, liabilities, and owner's equity on a specific date. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.3 - LO: 2-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. The income statement and statement of owner's equity provide information covering a period of time. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.3 - LO: 2-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. The accounting equation may be expressed as a. owner's equity = assets − liabilities. b. revenue − expenses = net income. c. revenue = net income − expenses. d. liabilities − owner's equity = assets. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.2 - LO: 2-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 28. Jason purchased office equipment for $4,800 in cash. This transaction would a. increase assets and increase owner's equity. b. increase assets and increase liabilities. c. increase one asset and decrease another asset. d. decrease assets and decrease liabilities. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. Stephen purchased office supplies for $800 on account. This transaction would a. increase assets and increase owner's equity. b. increase one asset and decrease another asset. c. increase assets and increase liabilities. d. decrease assets and decrease liabilities. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 30. Meghan started her business by investing $30,000 in cash. This transaction would a. increase assets and increase owner's equity. b. increase assets and increase liabilities. c. increase one asset and decrease another asset. d. decrease assets and decrease liabilities. ANSWER: a POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 31. Any accounting period of twelve months' duration is usually referred to as a(n) a. fiscal year. b. calendar year. c. physical year. d. operational year. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 32. Increases to owner's equity may be from a. expenses that are incurred. b. expenses exceeding revenue for the period. c. withdrawals of cash from the business by the owner. d. revenue that is derived from sales of goods or services. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA BB-Critical thinking BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Understanding NOTES: 1 min. 33. Tyler paid $3,700 on account to the company from which equipment was purchased on credit. This transaction would a. decrease assets and decrease liabilities. b. increase assets and increase owner's equity. c. increase assets and increase liabilities. d. increase one asset and decrease another asset. ANSWER: a POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 34. An example of an expense is a. investments. b. supplies consumed. c. prepaid insurance. d. withdrawals by the owner. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. A decrease in owner's equity may result from a(n) a. purchase of office supplies for cash. b. withdrawal of cash from the business by the owner. c. revenue that is derived from sales of goods or services. d. investment of cash in the business by the owner. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA BB-Critical thinking BUSPROG: Analytic TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 36. Which phase of the accounting process involves recognizing the effect of transactions on assets, liabilities, owner's equity, revenue, and expenses of a business? a. input b. processing c. output d. summarizing ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.6 - LO: 2-6 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 37. The financial statement that should be completed first is the a. balance sheet. b. statement of financial position. c. statement of financial condition. d. income statement. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.3 - LO: 2-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Analyzing NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 38. Falana received $7,000 in cash from a client for professional services rendered. This transaction would a. increase assets and increase owner's equity. b. decrease assets and increase owner's equity. c. increase liabilities and decrease owner's equity. d. decrease assets and decrease owner's equity. ANSWER: a POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 39. The financial statement that shows the state of the firm's assets, liabilities, and owner's equity on a specific date is called a(n) a. balance sheet. b. statement of operations. c. statement of owner's equity. d. income statement. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.3 - LO: 2-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Analyzing NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 40. Sue Lee paid $1,200 for her employees' salaries. This transaction would a. increase assets and decrease owner's equity. b. increase assets and increase liabilities. c. decrease assets and decrease liabilities. d. decrease assets and decrease owner's equity. ANSWER: d POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 41. Match the letter corresponding to one of the basic elements of accounting to each of the accounts below. A = Asset L = Liability OE = Owner's Equity R = Revenue E = Expense 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Utility Expense Accounts Payable Prepaid Rent Supplies P. Coyote, Drawing Wages Expense P. Coyote, Capital Cash Advertising Expense Fees Earned

1. E 2. L 3. A 4. A 5. OE 6. E 7. OE 8. A 9. E 10. R POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 5 min. ANSWER:

42. Show the effect of each transaction on the three basic accounting elements by indicating the dollar amount of the increase or decrease under the proper element heading. Compute the resulting accounting equation. a. b. c. d. e. f.

Owner invested $16,500 cash in the business. Paid premium for two-year insurance policy, $1,500. Purchased a van valued at $35,000 with $5,000 down payment; the balance to be paid over three years. Paid the rent for the month, $900. Purchased $470 of supplies for cash. Cash sales for the month, $8,750.

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Chapter 2—Analyzing Transactions: The Accounting Equation g. h. i. j.

Billed credit customers $14,200 for monthly services. Paid monthly utility bill, $210. Owner withdrew $2,200 for personal use. Received payments of $3,300 from credit customers. ASSETS Cash

a. b. c. d. e. f. g. h. i. j.

____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

< < < < < < < < < < < < < <

____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

LIAB. Notes Payable

a. b. c. d. e. f. g. h. i. j.

Accounts Rec.

Supplies

____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

> >

= Prepaid Ins.

____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

Van

> > > > > > > > > > > >

____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

OWNER'S EQUITY Capital

Drawing

–

____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

PROOF Cash Accounts Receivable Supplies Prepaid Insurance Van

____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

____ ____ ____ ____ ____ ____

Revenues ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

Notes Payable Capital Drawing Revenues Expenses

–

Expenses ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

____ ____ ____ ____ ____ ____

ASSETS

ANSWER: Cash

Accounts + Rec.

Supplies

= +

Prepaid Ins.

Van

> >

= >

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Chapter 2—Analyzing Transactions: The Accounting Equation a. 16,500 b. (1,500) c. (5,000) d. (900) e. (470) f. 8,750 g. h. (210) i. (2,200) j. 3,300

1,500 35,000 470 14,200

18,270

< < < < < < < < < < < < < <

LIAB. Note Payable a. b. c. d. e. f. g. h. i. j.

___ 470

(3,300) 10,900

+ +

_____ 1,500

______ 35,000

> > > > > > > > > > >

OWNER'S EQUITY Capital

–

Drawing

Revenues –

Expenses

16,500 30,000 900 8,750 14,200 210 ______ 30,000

PROOF Cash Accounts Receivable Supplies Prepaid Insurance Van

______ 16,500

2,200 _____ 2,200

18,270 10,900 470 1,500 35,000 66,140

______ 22,950

Notes Payable Capital Drawing Revenues Expenses

_____ 1,110

30,000 16,500 (2,200) 22,950 (1,110 66,140

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Easy COLL.HEIN.17.2 - LO: 2-2 COLL.HEIN.17.4 - LO: 2-4 COLL.HEIN.17.5 - LO: 2-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Applying NOTES: 15 min. Cengage Learning Testing, Powered by Cognero

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Chapter 2—Analyzing Transactions: The Accounting Equation 43. Show the effects of each transaction on the accounting equation by indicating under the proper heading the dollar amount of increase or decrease for each transaction listed below. Compute the resulting accounting equation. a. b. c. d. e. f. g.

Owner deposited $20,000 in his new business checking account. Supplies were purchased for $300 on account. Paid a $1,200 premium for six months of liability insurance. Purchased supplies for $200 cash. Purchased equipment for $4,000 by paying $1,000; the rest to be paid in six months. Paid the $300 bill outstanding (from transaction b). Owner withdrew $700 from the business for personal use. ASSETS

= LIAB. +

Prep. Accts. Cash + Supp. + Insur. + Equip = Pay. a. b. c. d. e. f. g.

____ ____ ____ ____ ____ ____ ____ ____

a. b. c. d. e. f. g.

____ ____ ____ ____ ____ ____ ____ ____

= LIAB. +

Prep. Cash + Supp. + Insur. + Equip = 20,000 300 (1,200) 1,200 (200) 200 (1,000) 4,000 (300) (700) ___ _____ _____ 16,600 500 1,200 4,000

PROOF Cash Supplies Prepaid Insurance Equipment POINTS: DIFFICULTY: LEARNING OBJECTIVES:

+ Capital – Drawing

____ ____ ____ ____ ____ ____ ____ ____

ASSETS

ANSWER:

OWNER'S EQUITY

16,600 Accounts Payable 500 Capital 1,200 Drawing 4,000 22,300

Accts. Pay.

OWNER'S EQUIT

Capital 20,000

300

3,000 (300) _____ 3,000

______ 20,000

3,000 20,000 (700) _____ 22,300

1 Easy COLL.HEIN.17.2 - LO: 2-2 COLL.HEIN.17.4 - LO: 2-4 COLL.HEIN.17.5 - LO: 2-3

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Chapter 2—Analyzing Transactions: The Accounting Equation ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Applying NOTES: 15 min. 44. Madame Shira began a fortune telling business on May 1. The following transactions occurred: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

Owner Madame Shira invested $5,000 cash in the business. Purchased $2,000 of furniture with a down payment of $500; the rest by issuing an account payable to be paid in three monthly installments. Paid $700 rent. Purchased a crystal ball for $300. Paid $1,700 for a 12-month insurance policy. During the first month received $2,500 from cash customers. Sent billings of $2,000 for services rendered to credit customers. Paid assistant $1,500 wages for the month. Received $600 in payments from credit customers. Borrowed $3,200 by signing a note. Made a $500 payment on the furniture bill (from transaction 2). Owner withdrew $300 cash for personal use. Paid bills for advertising $60, utilities $39, and repairs $52.

Required: 1. Enter the above transactions in an accounting equation work sheet. 2. Prepare an income statement for Madame Shira for the month of May. 3. Prepare a statement of owner's equity for the month of May. ANSWER:

Cash 5,000 (500) (700) (300) (1,700) 2,500

1. 2. 3. 4. 5. 6. 7. 8. (1,500) 9. 600 10. 3,200 11. (500) 12. (300) 13. (60) (39) (52) 5,649 Cengage Learning Testing, Powered by Cognero

ASSETS = LIABILIT Crystal Accounts Prepaid Accounts + Furniture + + + = Ball Rec. Ins. 2,000 300 1,700 2,000 (600)

____ 2,000

___ 300

_____ 1,400

_____ 1,700 Page 21

Chapter 2—Analyzing Transactions: The Accounting Equation <

+ EQUITY < Shira, + Capital 5,000 < < < < < < < < < < < < < < _____ < 5,000 <

OWNER'S

–

Shira, Drawing

Revenues

–

Expenses

Desc.

700 Rent

2,500 2,000 1,500 Wages

300

___ 300

_____ 4,500

60 Advertising 39 Utilities 52 Repairs 2,351

2. Madame Shira Fortune Telling Income Statement For Month Ended May 31, 20-Revenues: Fortune telling fees Expenses: Rent expense Wages expense Advertising expense Utilities expense Repairs expense Total expenses Net income

$4,500 $ 700 1,500 60 39 52 2,351 $2,149

POINTS:

Madame Shira Fortune Telling Statement of Owner's Equity For Month Ended May 31, 20-Madame Shira, capital May 1, 20-Investment by owner Net income for May Less withdrawals for May Increase in capital Madame Shira, capital May 31, 20-1

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$ 0 5,000 $2,149 300 1,849 $6,849

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Chapter 2—Analyzing Transactions: The Accounting Equation DIFFICULTY: LEARNING OBJECTIVES:

Moderate COLL.HEIN.17.3 - LO: 2-5 COLL.HEIN.17.4 - LO: 2-4 COLL.HEIN.17.5 - LO: 2-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Applying NOTES: 15 min. 45. From the following list of accounts, prepare an income statement, statement of owner's equity, and balance sheet for the year ended or at December 31, 20--, for Milner's Star Express Cleaning Service. Cash Fees Earned Accounts Payable D. Milner, Capital January 1, 20-D. Milner, Drawing Utilities Expense Prepaid Insurance Rent Expense Accounts Receivable Equipment Wages Expense

$ 2,026 13,835 7,530 6,000 1,750 153 1,216 1,200 4,080 15,290 1,650

ANSWER: Milner's Star Express Cleaning Service Income Statement For the Year Ended December 31, 20-Revenues: Fees earned Expenses: Utilities expense Rent expense Wages expense Total expenses Net income

$13,835 $ 153 1,200 1,650 3,003 $10,832

Milner's Star Express Cleaning Service Statement of Owner's Equity For the Year Ended December 31, 20-D. Milner, capital January 1, 20-Net income for the year $10,832 Less withdrawals for the year 1,750 Increase in capital D. Milner, capital December 31, 20--

$ 6,000

9,082 $15,082

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Chapter 2—Analyzing Transactions: The Accounting Equation December 31, 20-Assets Cash Prepaid insurance Accounts receivable Equipment

$ 2,026 1,216 4,080 15,290

Total assets

$22,612

Liabilities Accounts payable

$ 7,530

Owner's Equity D. Milner, capital 15,082 Total liab. & owner's $22,612 equity

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.3 - LO: 2-5 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Applying NOTES: 15 min. 46. From the following list of accounts, prepare an income statement, statement of owner's equity, and balance sheet for the year ended or at December 31, 20--, for J. Carr's Delivery Service. Cash Accounts Payable Fees Earned J. Carr, Capital January 1, 20-J. Carr, Drawing Office Supplies Rent Expense Accounts Receivable Equipment Wages Expense Repairs Expense Furniture

$11,450 4,450 41,500 14,500 7,000 250 10,000 7,000 6,000 14,000 250 4,500

ANSWER: J. Carr's Delivery Service Income Statement For the Year Ended December 31, 20-Revenues: Fees earned Expenses: Rent expense Wages expense Repairs expense Total expenses Net income

$41,500 $10,000 14,000 250 24,250 $17,250 J. Carr's Delivery Service Statement of Owner's Equity

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Chapter 2—Analyzing Transactions: The Accounting Equation For the Year Ended December 31, 20-J. Carr, capital January 1, 20-Net income for the year $17,250 Less withdrawals for the year 7,000 Increase in capital J. Carr, capital December 31, 20--

Assets Cash Accounts receivable Office supplies Equipment Furniture Total assets

J. Carr's Delivery Service Balance Sheet December 31, 20-Liabilities $11,450 Accounts Payable 7,000 250 6,000 Owner's Equity 4,500 J. Carr, capital Total liab. & owner's $29,200 equity

$14,500

10,250 $24,750

$ 4,450

24,750 $29,200

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Chapter 2—Analyzing Transactions: The Accounting Equation 47. Dr. Etana Jenson is a podiatrist. As of December 31, Jenson owned the following assets related to the professional practice: Cash Office Equipment

$6,600 3,500

X-ray Equipment Laboratory Equipment

$9,000 3,000

As of that date, Jenson owed business suppliers as follows: Top Flight Office Equipment Co. Dunhill Medical Supplies Company Island Gas Company

$3,000 1,000 2,200

Required: Compute the amount of assets, liabilities, and owners' equity as of December 31.

a. Assets

Liabilities

Owner's Equity

_______________

_______________ _______________ Assuming that during January there is an increase of $4,600 in Dr. Jenson's business assets and an increase of $2,500 in the business liabilities, compute the resulting equation as of January 31.

_______________

_______________ _______________ Assuming that during February there is a decrease of $1,500 in assets and a decrease of $1,200 in liabilities, compute the resulting accounting equation as of February 28.

_______________

________________

Assets = a. $22,100 = b. 26,700 = c. 25,200 = POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 COLL.HEIN.17.5 - LO: 2-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Understanding NOTES: 3 min. ANSWER:

Liabilities $6,200 8,700 7,500

+ + + +

Owner's Equity $15,900 18,000 17,700

48. Kristin Holden started her own consulting business in July, 20--. During the first month, the following transactions Cengage Learning Testing, Powered by Cognero

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Chapter 2—Analyzing Transactions: The Accounting Equation occurred: a. b. c. d. e. f. g. h.

Owner invested $12,000 cash in the business. Purchased office equipment for $7,500 cash. Purchased computer equipment costing $11,500 on account. Paid $1,100 office rent for the month. Received $1,700 cash from a client for services rendered. Paid water bill for the month, $170. Paid $2,400 on account for computer equipment purchased in transaction (c). Paid the electric bill for the month, $200.

Required: Record the effects of these transactions in an accounting equation worksheet. ASSETS Office Cash + Equip. + a. Bal. b. Bal. c. Bal. d. Bal. e. Bal. f. Bal. g. Bal. h. Bal.

____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

< <

Computer Equip.

= LIABILITIES Accounts = Payable +

____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

+ + < < < < < < < < < <

a. Bal. b. Bal. c. Bal. d. Bal. e. Bal.

K. Holden, Capital ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

> >

> > > > > > > > > > > > > > > >

OWNER'S EQUITY Client Fees ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

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Rent Expense ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

Utilities Expense ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ Page 27

Chapter 2—Analyzing Transactions: The Accounting Equation < < < < < <

f. Bal. g. Bal. h. Bal.

____ ____ ____ ____ ____ ____

a. 12,000 Bal. 12,000 b. (7,500) Bal. 4,500 c. ______ Bal. 4,500 d. (1,100) Bal. 3,400 e. 1,700 Bal. 5,100 f. (170) Bal. 4,930 g. (2,400) Bal. 2,530 h. (200) Bal. 2,330

ASSETS = LIABILITIES Office Computer Accounts K. + Equip. + = Payable + Holden, Equip. Capital 12,000 12,000 7,500 ______ 7,500 12,000 _____ 11,500 11,500 ______ 7,500 11,500 11,500 12,000 _____ ______ _______ ______ 7,500 11,500 11,500 12,000 _____ ______ ______ ______ 7,500 11,500 11,500 12,000 _____ ______ ______ ______ 7,500 11,500 11,500 12,000 _____ ______ (2,400) ______ 7,500 11,500 9,100 12,000 _____ ______ ______ ______ 7,500 11,500 9,100 12,000

< < < < < < < < < < < < < < < < <

ANSWER: Cash

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____ ____ ____ ____ ____ ____

a. Bal. b. Bal. c. Bal. d. Bal. e. Bal. f. Bal. g. Bal. h. Bal.

> >

> > > > > > > > > > > > > > > >

OWNER'S EQUITY Client Fees

Rent Expense

Utilities Expense

1,100 1,700 1,700 _____ 1,700 _____ 1,700 _____ 1,700

1,100 1,100 _____ 1,100 _____ 1,100 _____ 1,100

170 170 ___ 170 200 370

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Chapter 2—Analyzing Transactions: The Accounting Equation POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 10 min. 49. Most businesses recognize ____________________ when earned, even if cash has not yet been received. ANSWER: revenue POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 50. ____________________ represent the decrease in assets (or increase in liabilities) as a result of efforts made to produce revenues. ANSWER: Expenses POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 51. The ____________________, sometimes called the profit and loss statement, reports the profitability of business operations for a specific period of time. ANSWER: income statement POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.3 - LO: 2-5 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 52. ____________________ represent the amount a business charges customers for products sold or services performed. ANSWER: Revenues POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 53. The relationship between the three basic accounting elements: ____________________, ____________________, and ____________________, can be expressed in the form of a simple equation known as the accounting equation. assets, liabilities, owner's equity assets, owner's equity, liabilities liabilities, assets, owner's equity liabilities, owner's equity, assets owner's equity, assets, liabilities owner's equity, liabilities, assets POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.2 - LO: 2-2 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. ANSWER:

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Chapter 2—Analyzing Transactions: The Accounting Equation 54. ____________________ represent probable future benefits. ANSWER: Assets POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.1 - LO: 2-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 55. A(n) ____________________ is an unwritten promise to pay a supplier for assets purchased or services received. ANSWER: accounts payable POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.1 - LO: 2-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 56. The report which shows a firm's assets, liabilities, and owner's equity as of a specific date is called the ____________________. ANSWER: balance sheet POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.3 - LO: 2-5 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 57. The ____________________ reports the investments and withdrawals by the owner, the profits and losses generated through operations, and how they have affected the capital account. ANSWER: statement of owner's equity POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.3 - LO: 2-5 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Understanding NOTES: 1 min. 58. A(n) ____________________ is a reduction in owner's equity as a result of the owner taking cash or other assets out of the business for personal use. ANSWER: withdrawal POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.4 - LO: 2-4 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 59. ____________________ is the amount by which business assets exceed the business liabilities. ANSWER: Owner's equity POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.1 - LO: 2-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 60. Amounts owed to the business by its customers are called ____________________. ANSWER: accounts receivable POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.1 - LO: 2-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 61. A(n) ____________________ is an economic event that has a direct impact on the business. ANSWER: business transaction POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.5 - LO: 2-3 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 62. A(n) ____________________ is a separate record used to summarize changes in assets, liabilities, and owner's equity of a business. ANSWER: account POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.5 - LO: 2-3 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 2—Analyzing Transactions: The Accounting Equation 63. According to the ____________________, nonbusiness assets and liabilities are not included in the business entity's accounting records. ANSWER: business entity concept POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.1 - LO: 2-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 64. ____________________ is a measure of the ease with which an asset will be converted to cash. ANSWER: Liquidity POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.1 - LO: 2-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. account b. accounts payable c. accounts receivable d. accounting equation e. assets f. balance sheet g. business entity h. business entity concept i. business transaction j. drawing k. expenses l. income statement m. liability n. net income o. net loss p. notes payable q. owner's equity r. revenues Cengage Learning Testing, Powered by Cognero

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Chapter 2—Analyzing Transactions: The Accounting Equation s. statement of owner's equity DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.1 - LO: 2-1 COLL.HEIN.17.2 - LO: 2-2 COLL.HEIN.17.3 - LO: 2-5 COLL.HEIN.17.4 - LO: 2-4 COLL.HEIN.17.5 - LO: 2-3 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 65. The amount by which the business assets exceed the business liabilities. ANSWER: q POINTS: 1 66. Reports assets, liabilities, and owner's equity on a specific date. ANSWER: f POINTS: 1 67. Withdrawals that reduce owner's equity as a result of the owner taking cash or other assets out of the business for personal use. ANSWER: j POINTS: 1 68. The decrease in assets (or increase in liabilities) as a result of efforts to produce revenues. ANSWER: k POINTS: 1 69. A formal written promise to pay a supplier or lender a specified sum of money at a definite future time. ANSWER: p POINTS: 1 70. The excess of total revenues over total expenses for the period. ANSWER: n POINTS: 1 71. Reports the profitability of business operations for a specific period of time. ANSWER: l POINTS: 1

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Chapter 2—Analyzing Transactions: The Accounting Equation 72. Reports beginning capital, plus net income, less withdrawals to compute ending capital. ANSWER: s POINTS: 1 73. An economic event that has a direct impact on the business. ANSWER: i POINTS: 1 74. The concept that nonbusiness assets and liabilities are not included in the business' accounting records. ANSWER: h POINTS: 1 75. Consists of the three basic accounting elements: assets = liabilities + owner's equity. ANSWER: d POINTS: 1 76. Items a business owns that will provide future benefits. ANSWER: e POINTS: 1 77. An unwritten promise to pay a supplier for assets purchased or services rendered. ANSWER: b POINTS: 1 78. A separate record used to summarize changes in each asset, liability, and owner's equity of a business. ANSWER: a POINTS: 1 79. An amount owed to a business by its customers as a result of the sale of goods or services. ANSWER: c POINTS: 1 80. An individual, association, or organization that engages in economic activities and controls specific economic resources. ANSWER: g POINTS: 1

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Chapter 3—The DoubleEntry Framework 1. An increase or decrease in any asset, liability, owner's equity, revenue, or expense is always accompanied by an offsetting change within the basic accounting elements. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.7 - LO: 3-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. A T account has three parts: the title, the debit side, and the credit side. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.7 - LO: 3-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. To debit an account is to enter an amount on the left side of the account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 4. Liability accounts normally have debit balances. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. Expense accounts normally have debit balances. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. Prepaid Insurance is an asset account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 7. At least two accounts are affected by every transaction. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. The fact that each transaction has a dual effect on the accounting elements provides the basis for what is called complex-entry accounting. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.7 - LO: 3-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. The sum of the debits must equal the sum of the credits on the trial balance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.10 - LO: 3-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 10. Prepaid insurance and supplies are assets because they will provide benefits for more than one month. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. The difference between the footings of an account is called the balance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.11 - LO: 3-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. The trial balance is used in preparing financial statements. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.10 - LO: 3-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 13. A credit increases liabilities and owner's equity. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. Equity accounts normally have debit balances. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. Revenues decrease owner's equity. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 16. Payment of rent on account decreases the Cash account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. Withdrawals of cash and other assets by the owner for personal reasons decrease owner's equity. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. If services for the month total $7,000 in cash and $1,500 on account, the revenue account increases $5,500. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 19. When services are performed for which payment will be received later, accounts receivable increases. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. When debits equal credits for a transaction, the accounting equation is in balance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. Connie made a purchase on account of printer paper to last for about three months; this transaction increased Supplies and decreased Accounts Payable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 22. The balance of a T account is on the side with the larger footing. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.11 - LO: 3-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. An account is a form or record used to keep track of the increases or decreases in the individual assets, liabilities, owner's equity, revenues, and expenses of a business entity. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.7 - LO: 3-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. Owner's equity includes four types of accounts: Owner's Capital, Revenues, Expenses, and Owner's Drawing. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 25. Increases in owner's equity are entered as credits. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. The owner's capital account normally has a credit balance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. The purchase of a supply of markers for three months should be recorded as an increase in revenue and a decrease in cash. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 28. The accounting equation must remain in balance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.10 - LO: 3-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. A trial balance is a formal business report. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.10 - LO: 3-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. A trial balance is taken periodically to check the equality of the debits and credits. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.10 - LO: 3-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 31. A trial balance is a list of all accounts showing the title and balance of each account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.10 - LO: 3-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. If services for the month total $3,300 in cash and $700 on account, the cash account increases $700. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Understanding NOTES: 1 min. 33. If services for the month total $3,300 in cash and $700 on account, Accounts Receivable increases $700. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 34. Services on account increase a revenue account and increase the cash account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Understanding NOTES: 1 min. 35. Elysa paid $135 for utilities for her office; this transaction increased Cash and the expense account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Understanding NOTES: 1 min. 36. John received $350 for delivery services; this transaction increased Cash and revenue. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 37. Kate made a $475 payment on her company van. She should credit Accounts Payable and debit the automobile account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Understanding NOTES: 1 min. 38. Craig deposits $6,000 in an account to start a new business. He should debit Cash and credit his capital account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Understanding NOTES: 1 min. 39. Mandy withdraws $600 from her business. This transaction increases cash but decreases owner's equity. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 40. The standard T account includes all of the following EXCEPT a. a credit side. b. a debit side. c. a title. d. the current date. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.7 - LO: 3-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 41. Asset and expense accounts normally have a. credit balances. b. large balances. c. debit balances. d. negative balances. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 42. Accounts that affect owner's equity are a. assets, capital, and revenue. b. capital, liabilities, and expenses. c. expenses, capital, and revenue. d. drawing, assets, and liabilities. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 43. Increases are entered on the credit side of a(n) a. asset account. b. liability account. c. expense account. d. drawing account. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 44. A credit a. increases assets. b. is on the right side. c. decreases liabilities. d. decreases owner's equity. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 45. A T account has which of the following three major parts? a. a title, a debit side, and a credit side b. a title, a current date, and a balance c. a debit side, a credit side, and a total column d. a debit side, a credit side, and a balance ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.7 - LO: 3-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 46. A cash payment on a loan affects which of the following accounts? a. Cash and Accounts Receivable b. Cash and Notes Payable c. Cash and an expense account d. Cash and a revenue account ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 47. The drawing account should be used to show a. the amount the owner has invested in the business. b. the amount the owner has taken out of the business. c. the amount the business has earned. d. the amount the business has spent. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 48. A debit a. is on the left side. b. decreases assets. c. increases liabilities. d. increases owner's equity. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 49. Liability, owner's capital, and revenue accounts normally have a. debit balances. b. large balances. c. negative balances. d. credit balances. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 50. A debit represents an increase in a. an asset. b. a liability. c. owner's equity. d. revenues. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 51. Totals on the debit and credit sides to determine the balance of an account are known as a. rulings. b. credits. c. debits. d. footings. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.11 - LO: 3-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 52. The fact that each transaction has a dual effect on the accounting elements provides the basis for what is called a. single-entry accounting. b. compound-entry accounting. c. multiple-entry accounting. d. double-entry accounting. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.7 - LO: 3-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 53. An increase in an asset account may be offset by a(n) a. decrease in a liability account. b. increase in an expense account. c. increase in owner's equity. d. decrease in owner's equity. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 54. The difference between the total debits and credits to an account is called a a. balance. b. ruling. c. footing. d. trial balance. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.11 - LO: 3-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 55. The capital account a. decreases with increased revenue. b. increases with increased expenses. c. has a normal balance of a debit. d. increases when the owner invests money in the business. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 56. The normal balance of a capital account a. can be either a debit or a credit balance. b. is a debit balance. c. is a credit balance. d. is called a footing. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 57. An example of an expense is a. prepaid insurance. b. advertising. c. accounts payable. d. cash. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 58. Revenues a. decrease liabilities. b. decrease cash. c. increase expenses. d. increase owner's equity. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 59. Examples of revenue accounts include all of the following EXCEPT a. Wages. b. Sales. c. Delivery Fees. d. Professional Fees. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 60. An investment of cash in a business by the owner a. increases cash. b. decreases owner's equity. c. appears in a liability account. d. represents an obligation of the business. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 61. A purchase of an asset on account a. increases cash. b. decreases owner's equity. c. increases assets. d. decreases expenses. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 62. The purchase of an asset on account and making a partial payment results in all of the following EXCEPT a. an increase in an asset account. b. a decrease in the Cash account. c. a balanced accounting equation. d. an increase in owner's equity. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 63. The balance sheet a. is a list of all accounts showing the title and balance of each account. b. is used as an aid in preparing the trial balance and income statement. c. is for a period of time. d. shows that assets equal liabilities plus owner's equity. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.10 - LO: 3-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 64. Payment of office rent represents a decrease in a. a liability account. b. expenses. c. cash. d. a revenue account. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 65. Footings in T accounts a. appear after each entry. b. always appear on the right side. c. are unnecessary when there is only one entry. d. appear only in accounts carried over from the previous accounting period. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 66. Payment of a telephone bill represents an increase in a(n) a. asset. b. liability. c. revenue. d. expense. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 67. Falana receives payment for services performed in the amount of $3,147. This transaction a. decreases Wage Expense. b. increases Cash. c. increases owner's equity. d. decreases Cash. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 68. Footings in T accounts a. appear to the left of the amount columns. b. are used for accounts with more than one debit or credit. c. are only used in asset accounts. d. are used for accounts with only one entry. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.11 - LO: 3-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 69. The trial balance a. shows the current date. b. shows only debit balances. c. shows only credit balances. d. lists only accounts that are used to prepare the balance sheet. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.10 - LO: 3-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 70. Insert in the blank for each statement either the word "debit" or "credit." 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

An asset account is increased with a __________. Owner's equity is increased with a __________. To place an amount on the left-hand side of the T account is to __________ the account. The prepaid insurance account is increased by entering a __________. The drawing account is decreased by entering a __________. The accounts payable account is decreased with a __________. The owner's capital account is increased with a __________. The wages expense account is increased with a __________. The fees earned account is increased with a __________. The equipment account is decreased with a __________.

1. debit 2. credit 3. debit 4. debit 5. credit 6. debit 7. credit 8. debit 9. credit 10. credit POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 3 min. ANSWER:

71. Analyze the following transactions using the T account approach. Place the dollar amount on the debit and credit sides. After all transactions have been recorded, foot the accounts where necessary and enter the balance in the proper place. 1. 2. 3. 4. 5. 6.

Owner invested $15,000 in a business. Owner invested a truck worth $5,000 into the business. Cash received for services rendered for the month was $4,300. Received a bill for $150 for repairs. Purchased a piece of equipment worth $1,500, making a down payment of $250. Owner withdrew $1,400 from the company. Cash

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Chapter 3—The DoubleEntry Framework

Accounts Payable

Owner's Capital

Truck

Equipment

Owner's Drawing

Repair Expense

Revenue

ANSWER: Cash (1) 15,000 (3) 4,300 19,300

(5) 250 (6) 1,400 1,650

Bal. 17,650 Accounts Payable (4) 150 (5) 1,250 Bal. 1,400 Cengage Learning Testing, Powered by Cognero

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Chapter 3—The DoubleEntry Framework Owner's Capital (1) 15,000 (2) 5,000 Bal. 20,000 Truck (2) 5,000

Equipment (5) 1,500

Owner's Drawing (6) 1,400

Repair Expense (4) 150

Revenue (3) 4,300

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Easy COLL.HEIN.17.11 - LO: 3-2 COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 5 min. 72. Analyze the following transactions using the T account approach. Place the dollar amounts on the debit and credit sides. Indicate next to each entry the number for that transaction. After all transactions have been recorded, foot the accounts where necessary and enter the balance in the proper place for each account. 1. 2. 3. 4. 5.

Nick Bowman invested cash of $12,000 in the business. Received and paid utility bill of $125. Bought $300 of supplies on account. Sold services worth $2,500 to customers on account. Received cash payment of $800 from credit customers.

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Chapter 3—The DoubleEntry Framework

Cash

Accounts Receivable

Supplies

Accounts Payable

Owner's Capital

Utilities Expense

Revenue

ANSWER: Cash (1) 12,000 (5) 800 12,800 Bal. 12,675

(2)

125

Accounts Receivable (4) 2,500 (5)

800

Bal. 1,700 Supplies Cengage Learning Testing, Powered by Cognero

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Chapter 3—The DoubleEntry Framework (3)

300

Accounts Payable (3)

300

Owner's Capital (1) 12,000

Utilities Expense (2) 125

Revenue (4) 2,500

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Easy COLL.HEIN.17.11 - LO: 3-2 COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 5 min. 73. Record the following transactions in the T accounts below. Indicate next to each entry the number for that transaction. After all transactions have been recorded, foot the accounts where necessary and enter the balances in the proper places. Prepare a trial balance for Douglas Distinctive Services as of December 31, 20--. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Mr. Douglas invested $25,000 cash in the business. Purchased equipment worth $7,000 with a $500 down payment. The remainder is due in 30 days. Paid $900 cash for a six-month insurance policy. Received $3,000 cash from customers for services rendered. Paid wages, $1,750. Received and paid advertising bill of $100. Performed services worth $2,500 for credit customers. Received $1,700 cash from customers previously billed on account. Mr. Douglas withdrew $5,300 cash for personal use. Paid utility bill, $205.

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Chapter 3—The DoubleEntry Framework Cash

Accounts Receivable

Prepaid Insurance

Equipment

Accounts Payable

Douglas, Capital

Douglas, Drawing

Repair Fees

Wages Expense

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Chapter 3—The DoubleEntry Framework Advertising Expense

Utilities Expense

ANSWER: Cash (1) 25,000 (4) 3,000 (8) 1,700 29,700

(2) 500 (3) 900 (5) 1,750 (6) 100 (9) 5,300 (10) 205 8,755

Bal. 20,945 Accounts Receivable (7) 2,500 (8) 1,700 Bal. 800 Prepaid Insurance (3) 900

Equipment (2) 7,000

Accounts Payable (2) 6,500

Douglas, Capital (1) 25,000

Douglas, Drawing (9) 5,300 Cengage Learning Testing, Powered by Cognero

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Chapter 3—The DoubleEntry Framework

Repair Fees (4) 3,000 (7) 2,500 Bal. 5,500 Wages Expense (5) 1,750

Advertising Expense (6) 100

Utilities Expense (10) 205

Douglas Distinctive Services Trial Balance December 31, 20-Cash Accounts Receivable Prepaid Insurance Equipment Accounts Payable Douglas, Capital Douglas, Drawing Repair Fees Wages Expense Advertising Expense Utilities Expense

20,945 800 900 7,000 6,500 25,000 5,300 5,500 1,750 100 205 37,000

______ 37,000

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Moderate COLL.HEIN.17.10 - LO: 3-5 COLL.HEIN.17.11 - LO: 3-2 COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 15 min. Cengage Learning Testing, Powered by Cognero

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Chapter 3—The DoubleEntry Framework 74. The accounts below all have normal balances. Prepare a trial balance for Alana's Florist Shop as of September 30, 20--. Service Fees Accounts Receivable Rent Expense Utilities Expense Alana, Capital Alana, Drawing Wages Expense Equipment Supplies Accounts Payable Prepaid Insurance Cash

$40,650 18,000 3,700 1,400 42,100 2,700 18,300 35,000 4,400 10,400 1,600 8,050

ANSWER: Alana's Florist Shop Trial Balance September 30, 20-Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accounts Payable Alana, Capital Alana, Drawing Service Fees Rent Expense Utilities Expense Wages Expense

8,050 18,000 4,400 1,600 35,000 10,400 42,100 2,700 40,650 3,700 1,400 18,300 93,150

______ 93,150

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.10 - LO: 3-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 15 min. 75. Doug Allen has decided to go into the insect extermination business and to operate as Doug's Extermination Service. The following transactions were completed during the first month of operations, May, 20--. 1. 2. 3.

Doug invested $35,000 cash in the business. Purchased extermination equipment for $17,000 in cash. Paid $700 rent for garage and office quarters.

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Chapter 3—The DoubleEntry Framework 4. Purchased chemicals (expense) for $1,100 from Low Glow Chem Co. on account. 5. Received $1,600 revenue for extermination service. 6. Paid telephone bill, $120 7. Paid assistant's salary, $700. 8. Earned $980 revenue for extermination service, on account. 9. Paid electric bill, $230. 10. Paid for truck repairs (expense), $145. 11. Paid $600 to Low Glow Chem Co., on account. 12. Paid $131 for gas and oil for truck (expense). 13. Received $1,400 revenue for extermination service. 14. Received $500 for services previously earned on account in transaction (8). 15. Paid assistant's salary, $900. Enter the transactions in the T accounts, then enter the total of each column. If an account has entries on both sides, determine the balance and enter it on the side with the larger total. Cash

Accounts Receivable

Extermination Equipment

Accounts Payable

D. Allen, Capital

Extermination Revenue Cengage Learning Testing, Powered by Cognero

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Chapter 3—The DoubleEntry Framework

Rent Expense

Wages Expense

Truck Expense

Electricity Expense

Telephone Expense

Chemical Expense

ANSWER: Cash (1) 35,000 (5) 1,600 (13) 1,400 (14) 500 38,500

Bal. 17,974

(2) 17,000 (3) 700 (6) 120 (7) 700 (9) 230 (10) 145 (11) 600 (12) 131 (15) 900 20,526

Accounts Receivable (8) 980 (14) Cengage Learning Testing, Powered by Cognero

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Chapter 3—The DoubleEntry Framework Bal. 480 Extermination Equipment (2) 17,000

(11)

Accounts Payable 600 (4)

1,100

Bal.

500

D. Allen, Capital (1)

35,000

Extermination Revenue (5) 1,600 (8) 980 (13) 1,400 Bal. 3,980

(3)

Rent Expense 700

Wages Expense (7) 700 (15) 900 Bal. 1,600

(10) (12) Bal.

Truck Expense 145 131 276

Electricity Expense (9) 230

(6)

Telephone Expense 120

Chemical Expense Cengage Learning Testing, Powered by Cognero

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Chapter 3—The DoubleEntry Framework (4)

1,100

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Moderate COLL.HEIN.17.11 - LO: 3-2 COLL.HEIN.17.9 - LO: 3-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 20 min. 76. An amount entered on the left side of an account is called a(n) ____________________. ANSWER: debit POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 77. The ____________________ is shown on the third line of the trial balance heading. ANSWER: date POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.10 - LO: 3-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 78. A list of all accounts showing the account title and the balance of each account is called a(n) ____________________. ANSWER: trial balance POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.10 - LO: 3-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min. 79. A debit to either the ____________________ account or a(n) ____________________ account will cause a decrease in the owner's equity of a business. ANSWER:

drawing, expense expense, drawing POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 80. The normal balance for an expense account would be on the ____________________ side. ANSWER: debit POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 81. The ____________________ balance is on the side that increases an account. ANSWER: normal POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 82. To increase a revenue account will require a(n) ____________________ to the account. ANSWER: credit POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 83. To ____________________ an account means to enter an amount on the right side of the account. ANSWER: credit POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 3—The DoubleEntry Framework 84. The total dollar amounts on the debit and credit sides of a T account are known as ____________________. ANSWER: footings POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.11 - LO: 3-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. balance b. credit c. credit balance d. debit e. debit balance f. double-entry accounting g. footings h. normal balance i. T account j. trial balance DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.10 - LO: 3-5 COLL.HEIN.17.11 - LO: 3-2 COLL.HEIN.17.7 - LO: 3-1 COLL.HEIN.17.8 - LO: 3-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min. 85. The side that increases an account. ANSWER: h POINTS: 1 86. To enter an amount on the right side of an account. ANSWER: b POINTS: 1

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Chapter 3—The DoubleEntry Framework 87. A tool used to illustrate the double-entry accounting system showing the account title, left side, and right side. ANSWER: i POINTS: 1 88. The difference between the footings of an account. ANSWER: a POINTS: 1 89. The normal balance of liability, owner's equity, and revenue accounts. ANSWER: c POINTS: 1 90. The normal balance of asset, expense, and drawing accounts. ANSWER: e POINTS: 1 91. A list of accounts, showing the title and balance of each account, used to prove that the debit balances equal the credit balances. ANSWER: j POINTS: 1 92. The total dollar amounts on the debit and credit sides of an account. ANSWER: g POINTS: 1 93. A system in which each transaction has a dual effect on the accounting elements. ANSWER: f POINTS: 1 94. To enter an amount of the left side of an account. ANSWER: d POINTS: 1

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Chapter 4—Journalizing and Posting Transactions

1. The flow of data through the accounting information system includes analyzing transactions, journalizing, posting, and preparin balance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.12 - LO: 4-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. An account in the chart of accounts is assigned a number at random. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.13 - LO: 4-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. Source documents begin the process of entering transactions in the accounting system. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.14 - LO: 4-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 4. Source documents provide objective, verifiable evidence of business transactions. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.14 - LO: 4-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. Copies of sales tickets or sales invoices issued to customers or clients provide information about sales of goods or services. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.14 - LO: 4-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. Information about cash disbursements can be obtained from check stubs and carbon copies of checks. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.14 - LO: 4-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 7. The purpose of a journal is to provide a chronological record of all transactions completed by the business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. The chart of accounts includes the account titles in numerical order. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.13 - LO: 4-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. The Description column of a two-column journal is used to enter the titles of the accounts affected by each transaction, together with a description of the transaction. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 10. A separate line in the two-column journal should be used for each account title. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. Entering transactions in a journal is called posting. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. To make the posting process easier, posting reference entries are made at the same time that transactions are entered in the two-column journal. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 13. The posting reference, amount, and description are the three items of information about each transaction that should be entered in the ledger accounts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. The main advantage of a two-column account is that it maintains a running balance. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. It is permissible to enter information about a transaction in the ledger accounts first, before entering the information in the journal. a. True b. False ANSWER: POINTS: DIFFICULTY: LEARNING OBJECTIVES:

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Chapter 4—Journalizing and Posting Transactions 16. The journal provides the information needed to transfer the debits and credits to the accounts in the ledger. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. The ledger is a reliable source of information only when all of the transactions entered in the journal have been posted. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. The purpose of a trial balance is to prove that the totals of the debit and credit balances in the ledger accounts are equal. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 19. A complete set of all the accounts used by a business is known as the general ledger. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. When the trial balance indicates that the ledger is in balance, you can assume there are no errors in the ledger. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Understanding NOTES: 1 min. 21. In some cases, erasures are better for corrections than the ruling method. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.17 - LO: 4-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 22. A list of all the accounts used by a business is called a trial balance. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.13 - LO: 4-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. The chart of accounts includes assets, liabilities, and owner's equity accounts only. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.13 - LO: 4-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. Source documents provide the input for the accounting process. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.14 - LO: 4-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 25. Almost any document that provides information about a business transaction is included in the chart of accounts. a. True b. False ANSWER: POINTS: DIFFICULTY: LEARNING OBJECTIVES:

False 1 Easy COLL.HEIN.17.13 - LO: 4-2 COLL.HEIN.17.14 - LO: 4-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. Purchase invoices received from suppliers provide information about cash payments. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.14 - LO: 4-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Understanding NOTES: 1 min. 27. The process of copying the debits and credits from the journal to the ledger accounts is known as posting. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 28. After posting journal information to the ledger accounts, a check mark should be entered in the Posting Reference column of the journal to indicate that the transaction item has been posted. a. True b. False ANSWER: POINTS: DIFFICULTY: LEARNING OBJECTIVES:

False 1 Easy COLL.HEIN.17.15 - LO: 4-4 COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. A two-column journal has only two amount columns—one for the amount of the entry and one for the running balance. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. Each entry in the journal affects two or more accounts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 4—Journalizing and Posting Transactions

31. When entering titles of accounts in the two-column journal, the account to be credited is entered first and the account to be de entered second. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Understanding NOTES: 1 min. 32. No entries are made in the Posting Reference column in a two-column journal when journalizing. a. True b. False ANSWER: POINTS: DIFFICULTY: LEARNING OBJECTIVES:

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Chapter 4—Journalizing and Posting Transactions 34. Entering the account number in the Posting Reference column of the journal is the first step in the posting process. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. A trial balance can only be accurately prepared on the last day of the accounting period after all transactions have been entered. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. Transactions which do not affect the cash account do not need to be entered in the journal, since they do not affect net income or loss. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 37. The general ledger is kept to supply management with desired information in summary form. a. True b. False ANSWER: POINTS: DIFFICULTY: LEARNING OBJECTIVES:

True 1 Easy COLL.HEIN.17.15 - LO: 4-4 COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. All transactions must be posted before preparing a trial balance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Understanding NOTES: 1 min. 39. An erasure may suggest that you are hiding something. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.17 - LO: 4-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 40. The flow of financial data through the accounting information system does NOT include a. analyzing transactions. b. journalizing and posting transactions. c. preparing a trial balance. d. receiving payment for all accounts receivable. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.12 - LO: 4-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 41. A chart of accounts does NOT include a. assets. b. liabilities. c. owner's equity. d. names of suppliers. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.13 - LO: 4-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 42. Purchase invoices received from suppliers provide information about a. cash receipts. b. sales of goods. c. purchases of goods or services. d. cash payments. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.14 - LO: 4-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 43. When delivery equipment is purchased on account, the transaction to be entered by the purchaser includes a. debiting Delivery Equipment and crediting Accounts Payable. b. debiting Delivery Expense and crediting Cash. c. debiting Delivery Expense and crediting Accounts Payable. d. debiting Delivery Equipment and crediting Cash. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 44. A chronological record of financial transactions expressed as debits and credits to accounts is provided by the a. ledger. b. journal. c. balance sheet. d. trial balance. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 45. The month in the journal is recorded a. with every transaction. b. as the first entry on a page. c. for the first and last transaction of the month. d. for the last transaction of the month. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 46. Forms and papers that provide information about a business transaction are called a. ledgers. b. accounts. c. source documents. d. journals. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.14 - LO: 4-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 47. Because the first formal accounting record of a transaction is made in a journal from source document information, a journal is commonly referred to as a(n) a. ledger. b. account. c. cross-reference. d. book of original entry. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 48. For EVERY transaction, the accountant enters the a. year, month, and day. b. month and day. c. day. d. year and day. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 49. The transaction to record payment for delivery equipment that was purchased on account in the previous month would include a. debiting Cash and crediting Accounts Receivable. b. debiting Cash and crediting Accounts Payable. c. debiting Accounts Payable and crediting Cash. d. debiting Delivery Equipment and crediting Cash. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 50. Journalizing does NOT include a. debiting account(s) that are affected. b. crediting account(s) that are affected. c. posting the debits and credits to the accounts. d. entering the date. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 51. Copies of sales tickets or sales invoices issued to customers or clients provide information about a. sales of goods or services. b. purchases of goods or services. c. cash receipts. d. cash payments. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.14 - LO: 4-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 52. Receipt stubs, carbon copies of receipts, cash register tapes, or memos of cash register totals provide information about a. cash payments. b. cash receipts. c. accounts payable. d. purchases of goods or services. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.14 - LO: 4-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 53. The accounts in the chart of accounts are arranged in a. alphabetical order. b. numerical order. c. chronological order. d. the order they are created. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.13 - LO: 4-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 54. The steps in the journalizing process include all of the following EXCEPT a. enter the balance. b. enter the debit. c. enter the date. d. enter the credit. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 55. Purchase invoices received from suppliers provide information about a. cash payments. b. cash receipts. c. sales of goods or services. d. purchases of goods or services. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.14 - LO: 4-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 56. The simplest form of journal is one with a. four columns. b. three columns. c. two columns. d. one column. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 57. If the owner of a company invested cash in a business enterprise, the transaction would include a. debiting Cash and crediting Capital. b. debiting Capital and crediting Cash. c. debiting Cash and crediting Revenue. d. debiting Revenue and crediting Cash. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 58. Sales revenue received in cash is entered by a. debiting Cash and crediting Sales Revenue. b. debiting Sales Revenue and crediting Cash. c. debiting Cash and crediting Accounts Payable. d. debiting Accounts Payable and crediting Cash. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 59. Every entry in the journal should include all of the following EXCEPT a. the title of each account affected. b. the amounts. c. a brief description. d. the balance of the accounts affected. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 60. The Posting Reference column of the journal provides a cross-reference between the a. ledger and accounts. b. journal and ledger. c. ledger and financial statements. d. journal and financial statements. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 61. The Item column in the general ledger is used to describe special entries not including the following entries? a. Adjusting entries b. Reversing entries c. Correcting entries d. Forwarding entries ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 62. Posting from the journal to the ledger does NOT involve which of the following steps? a. Enter the date of each transaction in the accounts. b. Enter the amount of each transaction in the accounts. c. Enter the page of the journal from which each transaction is posted in the accounts. d. Enter the description of the entry. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 63. Instead of T accounts, businesses are more likely to use a a. chart of accounts. b. balance sheet. c. four-column account. d. special journal. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 64. Cash is used to pay for a car for personal use by the owner. The transaction includes a. debiting Cash and crediting Drawing. b. debiting Drawing and crediting Cash. c. debiting Capital and crediting Cash. d. debiting Car Expense and crediting Cash. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 65. Corrections in accounts should be made by a. correction fluid. b. neat erasure. c. the ruling method. d. a permanent marker. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.17 - LO: 4-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 66. Corrections in accounts should NOT be a. traceable. b. initialed. c. ruled. d. covered completely. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.17 - LO: 4-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 67. The payment of a utility bill (like electricity) for the month would include a. debiting Capital and crediting Accounts Payable. b. debiting Cash and crediting Utilities Expense. c. debiting Utilities Expense and crediting Accounts Payable. d. debiting Utilities Expense and crediting Cash. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 68. If cash is paid for worker salaries, the transaction includes a. debiting Salaries Expense and crediting Cash. b. debiting Salaries Expense and crediting Accounts Payable. c. debiting Salaries Expense and crediting Capital. d. debiting Cash and crediting Salaries Expense. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 69. To find an error, you should do all of the following EXCEPT a. double-check every entry. b. find the difference between debits and credits. c. erase questionable entries. d. retrace any math computations. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.17 - LO: 4-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 4—Journalizing and Posting Transactions 70. Organize a chart of accounts, using correct headings from the list of account titles below: Accounts Payable Accounts Receivable Building Cash Equipment Insurance Expense Prepaid Insurance Rent Expense Service Fees Dunlop, Capital Dunlop, Drawing Supplies Wage Expense Wages Payable ANSWER: Chart of Accounts Assets Cash Accounts Receivable Prepaid Insurance Supplies Building Equipment Liabilities Accounts Payable Wages Payable

Owner's Equity Dunlop, Capital Dunlop, Drawing Revenues Service Fees

Expenses Insurance Expense Rent Expense Wages Expense

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.13 - LO: 4-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 5 min.

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Chapter 4—Journalizing and Posting Transactions 71. In the two-column general journal page below, each capital letter represents a part of a journal entry. Write the proper letter next to the item in the list below to identify the proper part of the journal entry. GENERAL JOURNAL G H

Page 1 O P

M N

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Ledger account number of account credited Month Explanation Title of account debited Year Day of the month Title of account credited Amount of debit Amount of credit Ledger account number of account debited

1. P 2. H 3. L 4. J 5. G 6. I 7. K 8. M 9. N 10. O POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 5 min. ANSWER:

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Chapter 4—Journalizing and Posting Transactions 72. Prepare general journal entries to record the following transactions. Omit the explanations after each entry. Mar. 1 J. Lynch invested in a neighborhood movie house. Land, $100,000; building, $400,000; and equipment, $50,000; totaling $550,000. 2 Rental expense for the movies shown for the month, $6,000 on account. 5 Ticket sales for the month, $22,000 cash. 8 Wages paid for the month, $11,000. 12 Purchased a new popcorn machine, $3,300 on account. 17 Paid monthly fee to maintenance company, $2,700. 23 Rented the theater to an organization for a night. Billed them $2,300. 30 Paid $600 on the amount owed for the new popcorn machine. ANSWER:

Mar. 1 Land Building Equipment J. Lynch, Capital

100,000 400,000 50,000

2 Rental Expense Accounts Payable

6,000

5 Cash Ticket Sales

22,000

8 Wages Expense Cash

11,000

12 Equipment Accounts Payable

3,300

17 Maintenance Expense Cash

2,700

23 Accounts Receivable Rent Revenue

2,300

30 Accounts Payable Cash

600

550,000

6,000

22,000

11,000

3,300

2,700

2,300

600

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 10 min. 73. Prepare general journal entries to record the following transactions. Omit explanations. Cengage Learning Testing, Powered by Cognero

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Chapter 4—Journalizing and Posting Transactions Jan. 3 4 6 7 10 12 17 19 23 29

Paid office rent, $1,600. Bought a truck costing $50,000, making a down payment of $7,000. Paid wages, $3,000. Received $16,000 cash from customers for services performed. Paid $4,100 owed on last month's bills. Billed credit customers, $5,300. Received $1,800 from credit customers. Taylor Gordon, the owner, withdrew $1,700. Paid $700 on amount owed for truck. Received bill for utilities expense, $255.

ANSWER:

Jan. 3 Rent Expense Cash

1,600 1,600

4 Truck Cash Accounts Payable

50,000

6 Wages Expense Cash

3,000

7 Cash Service Fees

16,000

10 Accounts Payable Cash

4,100

12 Accounts Receivable Service Fees

5,300

17 Cash Accounts Receivable

1,800

19 Taylor Gordon, Drawing Cash

1,700

23 Accounts Payable Cash

700

29 Utilities Expense Accounts Payable

255

7,000 43,000

3,000

16,000

4,100

5,300

1,800

1,700

700

255

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Chapter 4—Journalizing and Posting Transactions KEYWORDS: NOTES:

Bloom's: Remembering 15 min.

74. Prepare a corrected trial balance by changing incorrect amounts and placing each amount in the proper column. Davenport's European Tours Trial Balance October 31, 20-Account Title Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accounts Payable Davenport, Capital Davenport, Drawing Repair Fees Wages Expense Rent Expense Advertising Expense Utilities Expense

a. b. c. d. e.

Debit 15,560 406 246 589 24,450

Credit

6,012 30,500 1,800 9,274 4,250 1,300 290 495 47,586

______ 47,586

Be sure all accounts have been listed with the appropriate debit or credit balance and check column totals. The debits to the Cash account are $36,796, and the credits are $29,009. A $600 payment to a creditor was entered in the journal, but was not posted to the Accounts Payable account. Cash was properly posted. The Advertising Expense total has a transposition error of $81. Accounts Receivable contains a slide error.

ANSWER: Davenport's European Tours Trial Balance October 31, 20-Account Title Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accounts Payable Davenport, Capital Davenport, Drawing Repair Fees Wages Expense Rent Expense Advertising Expense Cengage Learning Testing, Powered by Cognero

Debit (b) 7,787 (e) 4,060 246 589 24,450

Credit

Chapter 4—Journalizing and Posting Transactions Utilities Expense

495 45,186

______ 45,186

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.17 - LO: 4-6 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 15 min. 75. The following transactions occurred at Forever Green Lawn Service. Identify which account would be debited and credited to record each transaction. Write the identifying letters in the proper columns. The first transaction has been completed as an example. A. B. C. D. E. F. G. H. I.

1. 2.

3. 4. 5. 6. 7. 8. 9. 10.

Cash Accounts Receivable Supplies Equipment Accounts Payable Fees Income Rent Expense Salaries Expense Telephone Expense

Ex. Issued a check for monthly rent. Purchased supplies on account. Purchased new equipment, issuing a check for a down payment, with balance due in thirty days. Provided services on account. Purchase supplies for cash. Issued a check to pay a creditor on account. Collected payment from credit customer. Issued checks to pay employees their monthly salaries. Performed services for cash. Received cash for damaged supplies returned. Issued a check to pay the telephone bill.

ANSWER: 1. 2. 3. 4. 5. 6. Cengage Learning Testing, Powered by Cognero

Debit

Credit

G ____

A ____

____

____ ____ ____ ____

____

____ ____ ____

Debit C D B C E A

Credit E A, E F A A B Page 34

Chapter 4—Journalizing and Posting Transactions 7. H 8. A 9. A 10. I POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Understanding NOTES: 4 min.

A F C A

76. George Smyth opened a computer repair business on Apr. 1, 20--. During the first month of operations, the firm had the following transactions. Record these transactions on page 1 of the general journal. Omit explanations. Post appropriate transactions to the general ledger. Apr. 1 2 8 12 19 25

George Smyth invested $30,000 cash in the business. Paid rent for April, $2,100. Bought equipment for $12,000 and issued a check for $3,000 as a down payment. Performed services for $3,200 in cash, and $1,200 on credit. Paid electric bill, $225. Received $900 on account from credit customers.

JOURNAL Date

Description

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Page 1 Post Ref.

Debit

Credit

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Chapter 4—Journalizing and Posting Transactions

GENERAL LEDGER Account Cash

Date

Account No. 101 Balance Post Ref.

Item

Debit

Account Accounts Receivable Item

Item

Ref.

Debit

Credit

Debit

Credit

Account No. 181 Balance

Post Ref.

Account Accounts Payable Post Date Item Ref.

Credit

Balance

Account Equipment Date

Debit

Account No. 122

Post Date

Credit

Debit

Account George Smyth, Capital Post Date Item Ref. Debit Cengage Learning Testing, Powered by Cognero

Credit

Debit

Credit

Account No. 202 Balance Debit Credit

Account No. 311 Balance Credit Debit Credit Page 36

Chapter 4—Journalizing and Posting Transactions

Account Service Fees Date

Item

Post Ref.

Debit

Credit

Account Rent Expense

Account No. 521 Balance

Post Date

Item

Ref.

Debit

Credit

Account Electricity Expense Item

Ref.

Debit

Credit

Account No. 533 Balance

Post Date

Account No. 401 Balance Debit Credit

Debit

Credit

Debit

Credit

ANSWER: JOURNAL Post Date Description Ref. Apr. 1 Cash 101 George Smyth, Capital 311

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Page 1 Debit 30,000.00

Credit 30,000.00

2 Rent Expense Cash

521 101

2,100.00

8 Equipment Cash Accounts Payable

181 101 202

12,000.00

12 Cash Accounts Receivable

101 122

3,200.00 1,200.00

2,100.00

3,000.00 9,000.00

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Chapter 4—Journalizing and Posting Transactions Service Fees

401

4,400.00

19 Electricity Expense Cash

533 101

225.00

25 Cash Accounts Receivable

101 122

900.00

225.00

900.00

GENERAL LEDGER Account Cash Date Apr. 1 2 8 12 19 25

Item

Post Ref. J1 J1 J1 J1 J1 J1

Debit 30,000

Credit 2,100 3,000

3,200 225 900

Account No. 101 Balance Debit Credit 30,000 27,900 24,900 28,100 27,875 28,775

Account Accounts Receivable Account No. 122 Post Balance Date Item Ref. Debit Credit Debit Credit Apr. 12 J1 1,200 1,200 25 J1 900 300

Account Equipment Account No. 181 Post Balance Date Item Ref. Debit Credit Debit Credit 12,000 Apr. 8 J1 12,000

Account No. 202 Post Balance Date Item Ref. Debit Credit Debit Credit J1 9,000 Apr. 8 9,000

Account Accounts Payable

Account George Smyth, Capital Post Date Item Ref. Debit Cengage Learning Testing, Powered by Cognero

Account No. 311 Balance Credit Debit Credit Page 38

Chapter 4—Journalizing and Posting Transactions Apr. 1

30,000

Account Service Fees Account No. 401 Balance Post Date Item Ref. Debit Credit Debit Credit Apr. 12 4,400 J1 4,400

Account No. 521

Account Rent Expense Post Date

Item

Apr. 2

Balance

Ref.

Debit

2,100

Credit

Debit

Credit

2,100

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Moderate COLL.HEIN.17.15 - LO: 4-4 COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Analyzing NOTES: 20 min. 77. Transactions and journal entries are shown below. Read the transaction and determine if the correct journal entry has been made. If a correction is necessary, prepare a correcting entry. a.

Emma Fox, the owner, invested $47,000 cash. Equipment Emma Fox, Capital

47,000

Fox paid wages of $2,600. Wages Expense Wages Payable

47,000

2,600

Fox paid the monthly utility bill, $375. Supplies Cash

2,600

375 375

Fox made a payment on account for supplies purchased last month, $200. Accounts Payable Cash

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200 200 Page 39

Chapter 4—Journalizing and Posting Transactions e.

Services were provided to a client on account, $700. Accounts Payable Service Fees

700 700

ANSWER: a.

Cash Equipment

47,000

Wages Payable Cash

2,600

Utilities Expense Supplies

375

47,000

2,600

375

No correcting entry required as above entry is correct

Accounts Receivable Accounts Payable

700 700

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.17 - LO: 4-6 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Understanding NOTES: 5 min. 78. Transactions and journal entries are shown below. Read the transaction and determine if the correct journal entry has been made. If a correction is necessary, use the ruling method to make the correction. a.

Bert Hollis, the owner, invested $45,000 in the business. Cash Bert Hollis, Drawing

45,000

Hollis paid the monthly rent of $1,275. Cash Rent Expense

45,000

1,275 1,275

Hollis paid cash to Union Electric for monthly utilities, $250. Utilities Expense Accounts Payable

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Chapter 4—Journalizing and Posting Transactions

Hollis made payment on account for office supplies purchased previously, $100. Office Supplies Accounts Payable

100 100

A customer made a payment on account, $1,100. Accounts Receivable Service Fees

ANSWER:

1,100 1,100 Note: Text in parentheses is to be deleted. Changes appear italicized. Students should initial each correction. a.

Cash Bert Hollis, (Drawing) Capital

45,000

(Cash) Rent Expense (Rent Expense) Cash

1,275

Utilities Expense (Accounts Payable) Cash

250

(Office Supplies) Accounts Payable (Accounts Payable) Cash

100

(Accounts Receivable) Cash (Service Fees) Accounts Receivable

1,100

45,000

1,275

250

100

1,100

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.17 - LO: 4-6 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Understanding NOTES: 5 min. 79. Prepare a corrected trial balance by changing incorrect amounts and placing each amount in the proper column. Wesley's Towing Service Trial Balance September 30, 20-Wesley's Towing Service Trial Balance September 30, 20-Account Title Cash Accounts Receivable Supplies Cengage Learning Testing, Powered by Cognero

Debit 13,000 970 200

Credit

Page 41

Chapter 4—Journalizing and Posting Transactions Prepaid Insurance Equipment Accounts Payable Wesley, Capital Wesley, Drawing Repair Fees Wages Expense Rent Expense Advertising Expense Utilities Expense

a. b. c. d. e.

2,300 10,000 5,500 20,500 320 9,000 6,500 1,400 450 500 35,320

______ 35,320

Be sure all accounts have been listed with the appropriate debit or credit balance and check column totals. The debits to the Cash account are $37,421, and the credits are $34,381. A $500 payment to a creditor was entered in the journal, but was not posted to the Accounts Payable account. Cash was properly posted. The Advertising Expense total has a transposition error of $90. Accounts Receivable contains a slide error.

ANSWER: Wesley's Towing Service Trial Balance September 30, 20-Account Title Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accounts Payable Wesley, Capital Wesley, Drawing Repair Fees Wages Expense Rent Expense Advertising Expense Utilities Expense

Debit (b) 3,040 (e) 9,700 200 2,300 10,000

Credit

______ 34,500

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.17 - LO: 4-6 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-05-Accounting Cycle

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Chapter 4—Journalizing and Posting Transactions KEYWORDS: NOTES:

Bloom's: Remembering 15 min.

80. Almost any document that provides information about a business transaction can be called a(n) ____________________. ANSWER: source document POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.14 - LO: 4-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 81. When two digits in a debit or credit amount are reversed, a(n) ____________________ has occurred. ANSWER: transposition error POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.17 - LO: 4-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Understanding NOTES: 1 min. 82. When an incorrect entry has been journalized and posted to a wrong account or for the wrong amount, a(n) ____________________ is required. ANSWER: correcting entry POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.17 - LO: 4-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle

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Chapter 4—Journalizing and Posting Transactions KEYWORDS: NOTES:

Bloom's: Understanding 1 min.

83. Copying the debits and credits from the journal to the ledger accounts is a process called ____________________. ANSWER: posting POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min. 84. A list of all accounts (account titles) used by a business is called a(n) ____________________. ANSWER: chart of accounts POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.13 - LO: 4-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min. 85. The act of entering transactions in the journal is known as ____________________. ANSWER: journalizing POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions

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Chapter 4—Journalizing and Posting Transactions KEYWORDS: NOTES:

Bloom's: Remembering 1 min.

86. The ____________________ is used when a single line is drawn through the incorrect account title or amount and the correct information is written directly above the line. ANSWER: ruling method POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.17 - LO: 4-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min. 87. The journal is commonly referred to as a(n) ____________________, because it is here that the first formal accounting record of a transaction is made. ANSWER: book of original entry POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 88. Journal entries requiring more than one debit and/or one credit are called ____________________. ANSWER: compound entries POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.15 - LO: 4-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions

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Chapter 4—Journalizing and Posting Transactions KEYWORDS: NOTES:

Bloom's: Remembering 1 min.

89. The information in the Posting Reference columns of the journal and the ledger that provides a link between the journal and the ledger is known as a(n) ____________________. ANSWER: cross-reference POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 90. The Item column in a general ledger is used to provide ____________________ for special entries. ANSWER: descriptions POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 91. If the difference between the debits and credits of a trial balance is divisible by nine, you may have committed a(n) ____________________ or a(n) ____________________ error. ANSWER:

slide, transposition transposition, slide POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.17 - LO: 4-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions

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Chapter 4—Journalizing and Posting Transactions KEYWORDS: NOTES:

Bloom's: Understanding 1 min.

92. A(n) ____________________ occurs when debit or credit amounts move a digit or two to the left or right when entered. ANSWER: slide error POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.17 - LO: 4-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Understanding NOTES: 1 min. 93. A(n) ____________________ can be prepared daily, weekly, monthly, or whenever desired to prove the equality of the debits and credits in the ledger accounts. ANSWER: trial balance POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.16 - LO: 4-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. book of original entry b. chart of accounts c. compound entry d. correcting entry e. cross-reference f. four-column account g. general ledger h. journal i. journalizing j. posting k. ruling method l. slide error m. source document n. transposition error Cengage Learning Testing, Powered by Cognero

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Chapter 4—Journalizing and Posting Transactions o. trial balance DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.13 - LO: 4-2 COLL.HEIN.17.14 - LO: 4-3 COLL.HEIN.17.15 - LO: 4-4 COLL.HEIN.17.16 - LO: 4-5 COLL.HEIN.17.17 - LO: 4-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 94. Occurs when debit or credit amounts move a digit or two to the left or right when entered. ANSWER: l POINTS: 1 95. A list of all accounts (account titles) used by a business. ANSWER: b POINTS: 1 96. Entering the transactions in a journal. ANSWER: i POINTS: 1 97. A day-by-day listing of the transactions of a business. ANSWER: h POINTS: 1 98. An entry requiring more than one debit and/or one credit. ANSWER: c POINTS: 1 99. Contains columns for the debit or credit transactions and columns for the debit or credit running balance. In addition, there are columns for the date, description of the item, and posting reference. ANSWER: 6 POINTS: 1 100. Almost any document that provides information about a business transaction. ANSWER: m POINTS: 1 101. A complete set of all the accounts used by a business.

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Chapter 4—Journalizing and Posting Transactions ANSWER: g POINTS: 1 102. Another name for a journal because it is here that the first formal accounting record of a transaction is made. ANSWER: a POINTS: 1 103. The process of copying the debits and credits from the journal to the ledger accounts. ANSWER: j POINTS: 1 104. The link provided by the information in the Posting Reference columns of the journal and ledger. ANSWER: e POINTS: 1 105. Drawing a single line through the incorrect account title or amount and writing the correct information directly above the line. ANSWER: k POINTS: 1 106. Occurs when two digits are reversed. ANSWER: n POINTS: 1 107. Used to prove the equality of the debits and credits in the ledger accounts. ANSWER: o POINTS: 1 108. An entry to change an incorrect entry that has been journalized and posted to the wrong account. ANSWER: d POINTS: 1

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Chapter 5—Adjusting Entries and the Work Sheet 1. The matching of assets and expenses of a business on a periodic basis is referred to as the matching concept. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Evaluating NOTES: 1 min. 2. The balance sheet reports earnings on a specific date. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Evaluating NOTES: 1 min. 3. A 12-month fiscal year can end on any month of the calendar year. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Evaluating NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 4. Accounting for revenue on a cash basis means that no entry of revenue is made in the account until the cash is received for the services performed. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.19 - LO: 5-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Evaluating NOTES: 1 min. 5. Adjusting entries may affect the cash account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Evaluating NOTES: 1 min. 6. A contra-asset is deducted from the related asset on the balance sheet. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Evaluating NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 7. The book value of a plant asset is determined by subtracting the accumulated depreciation from the cost of the plant asset. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Evaluating NOTES: 1 min. 8. Under the modified cash basis of accounting, cash payments for assets with lives longer than one accounting period (buildings, equipment, insurance, etc.) are recorded as assets and adjustments are made each period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.19 - LO: 5-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Evaluating NOTES: 1 min. 9. A manual work sheet is usually prepared in pencil. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 10. When an account balance is not affected by an adjusting entry, the amount shown in the Trial Balance columns is extended directly to the Adjusted Trial Balance columns. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. Under the modified cash basis of accounting, adjustments are made only for prepaid items and depreciation on plant and equipment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.19 - LO: 5-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. "Adjusting" is written in the Item column of the general ledger when posting adjusting entries. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.21 - LO: 5-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 13. A contra-asset appears on the income statement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. The cost of plant assets less the accumulated depreciation is called the salvage value of the asset. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. If the total credits exceed total debits in the Income Statement columns of the work sheet, the business has had net income. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 16. The original cost of an asset less the trade-in or salvage value of an asset equals the depreciable cost of that asset. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. Depreciable cost is the amount of depreciation expense recorded for each accounting period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. The matching principle offers the best measure of net income. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 19. A fiscal year is always the same as the calendar year. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. A contra-asset has a credit balance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. The original cost of an asset added to its salvage value represents the depreciable cost of an asset. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 22. The net income or loss for the year can be found on the work sheet as the balance item at the bottom of either the Balance Sheet columns or the Income Statement columns. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Understanding NOTES: 1 min. 23. The modified cash basis of accounting combines aspects of the cash method of accounting and the accrual method of accounting. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.19 - LO: 5-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. It is not necessary to post adjusting entries. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.21 - LO: 5-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 25. If the debits in the Income Statement columns of the work sheet total $50,000 and the credits total $60,000 before net income or net loss has been determined, the business has a net income of $10,000. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Understanding NOTES: 1 min. 26. The only correct way to change the balance of a ledger account is to make a journal entry. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.22 - LO: 5-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. The 10-column work sheet is used to facilitate the preparation of the income statement, the statement of owner's equity, and the balance sheet. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 28. Depreciation expense is recorded for a specific period of time. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. The Income Statement columns of a work sheet include all revenue and expense accounts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. The owner's capital account in the last two columns of the work sheet is not up-to-date because it does not yet include net income and withdrawals of the current period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 31. The balance sheet reports assets, liabilities, and owner's equity for a specific period of time. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. Adjusting entries does not always affect both the income statement and the balance sheet. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. Depreciation matches the cost of an asset against the revenues it will produce. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 34. A contra-account is used with a related account to bring about an increase in the net amount of the two account balances. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. The historical cost principle allows for assets to be recorded at actual cost. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. If the total of the Income Statement Credit column, before determining net income or net loss, exceeds the total of the Income Statement Debit column, the result is a net loss for the year. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 37. Recording adjustments on the work sheet has no effect on the ledger accounts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.22 - LO: 5-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. Plant assets provide benefits over a long period of time. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 39. The amount of depreciation taken each period will be the same using the straight-line method. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 40. The formula to calculate straight-line depreciation is depreciable cost times the expected life of the asset. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 41. A computer workstation cost $35,000, has an expected life of 7 years, and an expected salvage value of $7,000. Depreciation expense using the straight-line method will be $5,000 per year. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 42. The business or professional person using the cash basis of accounting takes the view that there is no revenue until it is received in such a form that it can be spent. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.19 - LO: 5-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 43. Accounting for expenses on the cash basis generally means that expenses are entered in the accounts even though they may have been charged and not paid for in cash. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.19 - LO: 5-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 44. The cash basis of accounting and the accrual basis of accounting result in the same measures of net income. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.19 - LO: 5-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 45. Under the cash basis of accounting, a certain expense may be incurred in one period but not entered until the following period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.19 - LO: 5-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 46. The cash basis of accounting is used by some small businesses and by most individuals for tax purposes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.19 - LO: 5-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 47. While certain distinctive problems may arise in keeping the accounts of any specific enterprise, the principles of accounting on the cash basis are generally the same. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.19 - LO: 5-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 48. The balance sheet reports a. liabilities. b. revenue. c. expenses. d. net income. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 5—Adjusting Entries and the Work Sheet 49. The fourth pair of columns on a 10-column work sheet prepared at the end of the period would be the a. Income Statement columns. b. Adjustments columns. c. Balance Sheet columns. d. Adjusted Trial Balance columns. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min. 50. The third pair of columns on a 10-column work sheet prepared at the end of the period would be the a. Income Statement columns. b. Adjustments columns. c. Balance Sheet columns. d. Adjusted Trial Balance columns. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 51. The second pair of columns on a 10-column work sheet prepared at the end of the period would be the a. Income Statement columns. b. Trial Balance columns. c. Adjustments columns. d. Adjusted Trial Balance columns. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min. 52. The time an asset is expected to last is called its a. depreciation. b. fiscal period. c. net loss value. d. useful life. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 53. Matching the cost of an asset with the revenue it is expected to produce is called a. adjusting. b. expensing. c. depreciation. d. contra-valuing. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 54. The cost of an asset that is subject to depreciation is called a. salvage value. b. depreciable cost. c. revenue. d. trade-in value. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 55. An account used with a related account to bring about a decrease in the net amount of the two account balances is called a(n) a. contra-account. b. expense account. c. adjusting account. d. revenue account. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 56. If the book value of an asset is $12,500 and the accumulated depreciation is $3,500, the original cost of the asset is a. $16,000. b. $9,500. c. $9,000. d. $7,500. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 57. To record wages earned but not paid under the modified cash accounting method, a. debit Wages Payable and credit Wages Expense. b. debit Cash and credit Wages Expense. c. debit Wages Expense and credit Wages Payable. d. no entry is required. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.19 - LO: 5-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 58. When posting an adjusting entry to the general ledger, write a. "adjusting" in the Posting Reference column. b. "adjusting" in the Item column. c. "ledger" in the general ledger. d. "balance" in the work sheet. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.21 - LO: 5-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 59. If a business records revenue when it is received and records the purchase of a building as an asset and makes adjustments to allocate the cost of the building over many accounting periods, the business accounting system is a(n) a. accrual basis of accounting. b. adjustment basis of accounting. c. cash basis of accounting. d. modified cash basis of accounting. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 60. Net income is shown on the work sheet as a(n) a. debit in the Balance Sheet columns. b. credit in the Balance Sheet columns. c. debit and a credit in the Balance Sheet columns. d. adjustment to owner's equity. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 61. The fifth pair of columns on a 10-column work sheet prepared at the end of the period would be the a. Income Statement columns. b. Adjustments columns. c. Balance Sheet columns. d. Adjusted Trial Balance columns. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min. 62. In completing the work sheet, what is the reason for adding the net income for the year to the Balance Sheet Credit column? a. Owner's equity is not up-to-date. b. Cash is not up-to-date. c. Owner's withdrawal is not up-to-date. d. Sales is not up-to-date. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 63. Supplies originally cost $600, but only $150 worth of supplies were used this period. The adjusting entry would be a. debit Supplies Expense, $150; credit Supplies, $150. b. debit Supplies Expense, $450; credit Supplies, $450. c. debit Supplies, $150; credit Supplies Expense, $150. d. debit Supplies, $450; credit Supplies Expense, $450. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 64. Net income is shown on the work sheet as a a. debit in the Balance Sheet column. b. credit in the Income Statement column. c. debit in the Income Statement column. d. debit in the Adjustments column. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 65. Owner's equity at the start of the period is $35,000; net income for the period is $30,000; the total investments by the owner is $15,000; and total withdrawals by the owner is $5,000. The owner's equity at the end of the period is a. $80,000. b. $75,000. c. $85,000. d. $40,000. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 66. What does the credit balance in the Accumulated Depreciation account represent? a. the cost of additional equipment purchased this year b. the amount of depreciation taken in past years c. the cost of existing equipment sold during the year d. the amount of depreciation taken in the current year ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 67. The adjusting entry for the depreciation of office equipment for the period includes a. debiting Depreciation Expense—Office Equipment and crediting Office Equipment. b. debiting Office Equipment and crediting Accumulated Depreciation—Office Equipment. c. debiting Depreciation Expense—Office Equipment and crediting Accumulated Depreciation—Office Equipment. d. debiting Office Equipment and crediting Depreciation Expense—Office Equipment. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 68. The first pair of columns on a 10-column work sheet would be the a. Income Statement columns. b. Balance Sheet columns. c. Adjusted Trial Balance columns. d. Trial Balance columns. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 69. A typical account number for a contra-account would be a. 185. b. 185.c. c. 185.1. d. 185.contra. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 70. If a business records revenues when earned, regardless of whether cash has been received, and records expenses when they are incurred, the accounting system is a(n) a. accrual basis of accounting. b. cash basis of accounting. c. modified cash basis of accounting. d. revenue basis of accounting. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.19 - LO: 5-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 71. To record the purchase of assets on account under the modified cash basis of accounting method, a. debit the asset and credit Accounts Payable. b. debit the asset and credit Cash. c. debit Accounts Receivable and credit Accounts Payable. d. debit Accounts Payable and credit the asset. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.19 - LO: 5-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 72. When assets are recorded at original value, they are recorded under the a. historical cost principle. b. original principle. c. current principle. d. value principle. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 73. The matching principle in accounting requires the matching of a. revenue earned with the expenses incurred to produce the revenue. b. revenue earned with the assets used to produce the revenue. c. revenue earned with the liabilities incurred to produce the revenue. d. revenue earned with the assets used less the liabilities incurred. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 74. The depreciation system used by many businesses for tax purposes is the a. Accelerated Cost Recovery System. b. Modified Adjusted Cost Recovery System. c. Modified Actual Cost Recovery System. d. Modified Accelerated Cost Recovery System. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.22 - LO: 5-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 75. An asset cost $33,000. It has an expected useful life of 5 years and an expected salvage value of $3,000. Depreciation expense for the first year of the asset's life using the straight-line method is a. $6,000. b. $6,600. c. $10,000. d. $13,200. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 76. The Income Statement and Balance Sheet columns of a work sheet are produced below. Indicate with an "X" the specific Income Statement or Balance Sheet column(s) in which each amount transferred from the Adjusted Trial Balance columns should be placed, if at all.

1. 2. 3. 4. 5. 6. 7. 8. 9.

Account Title Assets Contra-Asset Liabilities Owner, Capital Owner, Drawing Revenue Expense Net Income Net Loss

Income Statement Debit Credit

Balance Sheet Debit Credit

____ ____ ____ ____ ____ ____ ____ ____ ____

ANSWER: Account Title 1. Assets 2. Contra-Asset 3. Liabilities 4. Owner, Capital 5. Owner, Drawing 6. Revenue 7. Expense 8. Net Income 9. Net Loss POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Understanding NOTES: 3 min.

____ ____ ____ ____ ____ ____ ____ ____ ____

Income Statement Debit Credit

Balance Sheet Debit Credit X X X X X

X X X

X X

77. The trial balance and information for year-end adjustments for Vilardi Company are as follows: Vilardi Company Trial Balance December 31, 20-Account Title Cash Accounts Receivable Supplies Prepaid Insurance Cengage Learning Testing, Powered by Cognero

Debit 15,700 9,400 6,000 1,500

Credit

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Chapter 5—Adjusting Entries and the Work Sheet Equipment Accumulated Depreciation—Equipment Accounts Payable Wages Payable Vilardi, Capital Vilardi, Drawing Service Fees Wages Expense Rent Expense Supplies Expense Utilities Expense Insurance Expense Depreciation Expense—Equipment

a. b. c. d.

50,000 10,000 5,400 29,460 1,500 63,000 15,100 7,800 860 _______ 107,860

_______ 107,860

Supplies on hand at year-end amounted to $420. The equipment costing $50,000 has an expected life of five years and no salvage value. Vilardi uses straight-line depreciation. A premium of $1,500 for a one-year insurance policy was paid on November 1. Wages earned by employees but not paid by year-end amounted to $900.

Prepare the necessary year-end adjustments on a 10-column work sheet (identify each adjustment by letter), and complete the work sheet. ANSWER: Vilardi Company Trial Balance (left side)

December 31, 20--

Account Title Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accum. Depr.—Equip. Accounts Payable Wages Payable Vilardi, Capital Vilardi, Drawing Service Fees Wages Cengage Learning Testing, Powered by Cognero

Trial Balance Debit Credit 15,700 9,400

Adjustments Debit Credit

6,000 1,500

(a) 5,580 (c) 250

50,000

Adjusted Trial Balance Debit Credit 15,700 9,400 420 1,250 50,000

10,000

(b) 10,000

20,000

5,400

5,400 (d) 900

900

29,460

1,500

1,500 63,000

15,100

63,000 (d) 900

16,000 Page 32

Chapter 5—Adjusting Entries and the Work Sheet Expense Rent Expense Supplies Expense Utilities Expense Insurance Expense Depr. Exp.—Equip.

7,800 (a) 5,580 860

860 (c) 250

_______

107,860

(right side) Account Title Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accum. Depr.—Equip Accounts Payable Wages Payable Vilardi, Capital Vilardi, Drawing Service Fees Wages Expense Rent Expense Supplies Expense Utilities Expense Insurance Expense Depr. Exp.—Equip. Net Income

7,800 5,580

(b) 10,000 16,730

250 ______

10,000

_______

16,730

118,760

Income Statement Debit Credit

Balance Sheet Debit Credit 15,700 9,400 420 1,250 50,000 20,000 5,400 900 29,460 1,500

63,000 16,000 7,800 5,580 860 250 10,000 40,490 22,510 63,000

______ 63,000 ______ 63,000

______ 78,270 ______ 78,270

______ 55,760 22,510 78,270

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Easy COLL.HEIN.17.18 - LO: 5-1 COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Understanding NOTES: 25 min.

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Chapter 5—Adjusting Entries and the Work Sheet 78. Journalize the necessary year-end adjusting entries based on the following account balances before adjustments. Trial Balance (partial) December 31, 20-Account Title Cash Supplies Prepaid Insurance Equipment Accumulated Depreciation—Equipment Accounts Payable Wages Expense Insurance Expense a. b. c.

Debit 12,340 2,100 1,800 34,000

Credit

8,000 6,430 17,333 3,800

The inventory of supplies on hand at December 31, 20--, was $230. The 4-month insurance premium of $1,800 was purchased on December 1, 20-. The $34,000 of equipment was purchased on January 1, two years ago. It has a salvage value of $2,000. Straight-line depreciation was used to compute depreciation at the end of last year. Wages accrued at December 31, 20--, were $3,700. a.

ANSWER:

Supplies Expense Supplies

1,870

Insurance Expense Prepaid Insurance

450

Depreciation Expense—Equipment Accumulated Depreciation—Equipment

4,000

Wages Expense Wages Payable

3,700

1,870

450

4,000

3,700

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Easy COLL.HEIN.17.18 - LO: 5-1 COLL.HEIN.17.22 - LO: 5-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Understanding NOTES: 4 min. 79. The trial balance and information for year-end adjustments for Litton Company are as follows: Litton Company Trial Balance December 31, 20-Cengage Learning Testing, Powered by Cognero

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Chapter 5—Adjusting Entries and the Work Sheet Account Title Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accumulated Depreciation—Equipment Accounts Payable Wages Payable Litton, Capital Litton, Drawing Service Fees Wages Expense Rent Expense Supplies Expense Utilities Expense Insurance Expense Depreciation Expense—Equipment

a. b. c. d.

Debit 19,780 5,500 1,500 2,400 30,200

Credit

5,000 5,520 44,000 4,000 20,000 10,000 900 240 ______ 74,520

______ 74,520

Ending inventory of supplies is $800 at December 31, 20--. Unexpired insurance as of year-end is $600. Depreciation of equipment is $5,000. Wages earned but not paid as of year-end are $1,700.

Prepare the necessary year-end adjustments on a 10-column work sheet (identify each adjustment by letter), and complete the work sheet. Litton Company Trial Balance December 31, 20--

ANSWER:

Account Title Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accum. Depr.—Equip. Accounts Payable Wages Payable Litton, Capital Litton, Drawing Service Fees Cengage Learning Testing, Powered by Cognero

Trial Balance Debit Credit 19,780 5,500 1,500 2,400

Adjustments Debit Credit

(a) 700 (b) 1,800

30,200

Adjusted Trial Balance Debit Credit 19,780 5,500 800 600 30,200

5,000

10,000

5,520

5,520 (d) 1,700

1,700 44,000

44,000 4,000

4,000 20,000

20,000 Page 35

Chapter 5—Adjusting Entries and the Work Sheet Wages Expense

10,000

Rent Expense Supplies Expense Utilities Expense Insurance Expense Depr. Exp.—Equip.

900

11,700 900 700

(a) 700 240

______

74,520

(d) 1,700

(b) 1,800 (c) 5,000 9,200

Income Statement Debit Credit

240 1,800 _____

5,000

______

9,200

81,220

Balance Sheet Debit Credit 19,780 5,500 800 600 30,200 10,000 5,520 1,700 44,000 4,000

20,000 11,700 900 700 240 1,800 5,000 20,340 ______ 20,340

______ 20,000 340 20,340

______ 60,880 340 61,220

______ 61,220 ______ 61,220

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Moderate COLL.HEIN.17.18 - LO: 5-1 COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Understanding NOTES: 25 min. 80. Jan Olsen is a lawyer specializing in estate law. A trial balance was taken on December 31, 20--. Complete the yearend adjusting entries and extend the appropriate balances to the Adjusted Trial Balance columns of the work sheet. Cengage Learning Testing, Powered by Cognero

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Chapter 5—Adjusting Entries and the Work Sheet Journalize the four adjusting entries exactly as shown in the Adjustments column of the work sheet. Entries should be in proper journal form and dated December 31. a. b. c. d.

Office supplies on hand at year-end amounted to $650. Expired insurance amounted to $900. Depreciation on the computer equipment, $1,150. Wages earned but not paid as of December 31, $1,230. Jan Olsen, Attorney Work Sheet (partial) For Year Ended December 31, 20--

Account Title Cash Accounts Receivable Office Supplies Prepaid Insurance Computer Equipment Accum. Depr.—Comp. Equip. Accounts Payable Wages Payable J. Olsen, Capital J. Olsen, Drawing Client Fees Rent Expense Wages Expense Telephone Expense Office Supplies Expense Insurance Expense Depr. Exp.—Comp. Equip. Utilities Expense

Trial Balance Debit Credit 15,000 8,750

Adjustments Debit Credit

Adjusted Trial Balance Debit Credit

1,000 1,400 27,300

11,550 28,000 2,800 40,000 6,000 14,000 1,100

2,200 79,550

_____ 79,550

GENERAL JOURNAL Page 1 Date

Description Adjusting Entries

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Post Ref.

Debit

Credit

Page 37

Chapter 5—Adjusting Entries and the Work Sheet

ANSWER: Jan Olsen, Attorney Work Sheet (partial) For Year Ended December 31, 20--

Trial Balance Debit Credit 15,000 8,750

Adjustments Debit Credit

1,000 1,400 27,300

(a) 350 (b) 900

Adjusted Trial Balance Debit Credit 15,000 8,750 650 500 27,300

1,150

11,550

11,550 1,230

(d) 1,230 28,000

28,000

2,800

2,800 40,000

6,000 14,000

40,000 6,000 15,230

(d) 1,230

1,100

1,100 350

(a) 350 (b) 900 (c) 1,150 2,200 79,550

_____ 79,550

_____ 3,630

900 1,150

_____ 3,630

2,200 81,930

_____ 81,930 Page 38

Chapter 5—Adjusting Entries and the Work Sheet

Date 20-Dec.

GENERAL JOURNAL Post Description Ref. Adjusting Entries 31 Supplies Expense Office Supplies

Page 1 Debit

Credit

350.00 350.00

31 Insurance Expense Prepaid Insurance

900.00

31 Depr. Exp.—Comp. Equip. Accum. Depr.—Comp. Equip.

1,150.00

31 Wages Expense Wages Payable

1,230.00

900.00

1,150.00

1,230.00

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Moderate COLL.HEIN.17.18 - LO: 5-1 COLL.HEIN.17.20 - LO: 5-2 COLL.HEIN.17.22 - LO: 5-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Understanding NOTES: 10 min.

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Chapter 5—Adjusting Entries and the Work Sheet 81. Compute the following: a.

Lobo Company purchased equipment for $40,000 with a useful life of five years and no expected salvage value. Prepare the adjusting entry for the first year using the straight-line depreciation method and compute the book value at the end of the second year of the equipment's life. Zip Company pays its employees every Friday. On January 4, 20--, the Company paid $2,200 for the 5 days beginning the previous December 31. Prepare the adjusting entry on December 31. a.

ANSWER:

Depreciation Expense—Equipment Accumulated Depreciation—Equipment Equipment Less: Accumulated Depreciation ($8,000 × 2) Book Value

Wages Expense Wages Payable

8,000 8,000 $40,000 16,000 $24,000 440 440

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Easy COLL.HEIN.17.18 - LO: 5-1 COLL.HEIN.17.22 - LO: 5-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Understanding NOTES: 2 min. 82. In the columns below, insert the entry that would be made for each transaction under each accounting basis, using appropriate debit and credit account titles. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Performed services on account. Supplies are partly used. Purchased one-year insurance policy for cash. Received bill for electricity. Depreciation on equipment. Purchased equipment on account. Paid cash for wages. Paid for equipment purchased on account. Performed services for cash. Paid cash for new equipment. Cash Basis

Modified Cash Basis

Accrual Basis

1. 2. Cengage Learning Testing, Powered by Cognero

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Chapter 5—Adjusting Entries and the Work Sheet 3. 4. 5. 6. 7. 8. 9. 10.

Cash Basis no entry

no entry

3. 4.

Insurance Expense Cash no entry

no entry

ANSWER:

Modified Cash Basis no entry

Accrual Basis Accounts Receivable Professional Fees Supplies Expense Supplies Expense Supplies Supplies Prepaid Insurance Prepaid Insurance Cash Cash no entry Utilities Expense Accounts Payable Depr. Exp.—Equip. Depr. Exp.—Equipment Accum. Depr.—Equip. Accum. Depr.—Equip. Equipment Equipment Accounts Payable Accounts Payable Wages Expense Wages Expense Cash Cash Accounts Payable Accounts Payable Cash Cash Cash Cash Professional Fees Professional Fees Equipment Equipment Cash Cash

Wages Expense Cash 8. Equipment Expense Cash 9. Cash Professional Fees 10. Equipment Expense Cash POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.19 - LO: 5-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Understanding NOTES: 10 min. Cengage Learning Testing, Powered by Cognero

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Chapter 5—Adjusting Entries and the Work Sheet 83. Compute the following: a.

Carder & Company purchased equipment for $24,000 with a useful life of eight years and no expected salvage value. Prepare the adjusting entry for the first year using the straightline depreciation method and compute the book value at the end of the second year of the equipment's life. DAC Company pays its employees every Friday. On January 2, 20--, the Company paid $6,000 for the 5 days beginning the previous December 29. Prepare the adjusting entry on December 31.

ANSWER:

Depreciation Expense—Equipment Accumulated Depreciation—Equipment Equipment Less: Accumulated Depreciation ($3,000 × 2) Book Value

Wages Expense Wages Payable

3,000 3,000 $24,000 6,000 $18,000 3,600 3,600

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Easy COLL.HEIN.17.18 - LO: 5-1 COLL.HEIN.17.22 - LO: 5-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Understanding NOTES: 2 min. 84. The work sheet columns that show the amounts that will be reported in the statement of owner's equity and the balance sheet are the ____________________. ANSWER: Balance Sheet columns POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 85. ____________________ is a method of matching an asset's original cost against the revenues produced over its useful life. ANSWER: Depreciation POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 86. The ____________________ is a method of accounting that combines aspects of the cash and accrual methods. It uses the cash basis for recording revenues and most expenses. Exceptions are made when cash is paid for assets with useful lives greater than one accounting period. ANSWER: modified cash basis POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.19 - LO: 5-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 87. The amount an item can be sold for under normal economic conditions is the ____________________. ANSWER: market value POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 88. In the columns below, insert the entry that would be made for each transaction under each accounting basis, using appropriate debit and credit account titles. 1. 2. 3. 4. 5.

Purchased equipment on account Paid cash for new equipment. Purchased one-year insurance policy for cash. Received bill for electricity. Performed services for cash.

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Chapter 5—Adjusting Entries and the Work Sheet 6. 7. 8. 9. 10.

Performed services on account. Paid cash for wages. Paid for equipment purchased on account. Depreciation on equipment. Supplies are partly used. Cash Basis

Modified Cash Basis

Accrual Basis

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

ANSWER: 1. 2. 3. 4. 5. 6. 7. 8. 9.

Cash Basis no entry Equipment Expense Cash Insurance Expense Cash no entry Cash Service Fees no entry Wages Expense Cash Equipment Expense Cash no entry

10. no entry Cengage Learning Testing, Powered by Cognero

Modified Cash Basis Equipment Accounts Payable Equipment Cash Prepaid Insurance Cash no entry

Accrual Basis Equipment Accounts Payable Equipment Cash Prepaid Insurance Cash Utilities Expense Accounts Payable Cash Cash Service Fees Service Fees no entry Accounts Receivable Service Fees Wages Expense Wages Expense Cash Cash Accounts Payable Accounts Payable Cash Cash Depr. Exp.—Equip. Depr. Exp.—Equip. Accum. Depr.—Equip. Accum. Depr.—Equip. Supplies Expense Supplies Expense Page 44

Chapter 5—Adjusting Entries and the Work Sheet Supplies

Supplies

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.19 - LO: 5-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Understanding NOTES: 10 min. 89. The ____________________ method is a depreciation method in which the depreciable cost is divided by the estimated useful life. ANSWER: straight-line POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 90. The columns of the work sheet that report the adjusted balances for only revenue and expense accounts are the ____________________ columns. ANSWER: Income Statement POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 91. The period of time that an asset is expected to help produce revenues is called its ____________________. ANSWER: useful life POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 92. The expected market value or selling price of the asset at the end of its useful life is called the ____________________. ANSWER: salvage value POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 93. Accumulated Depreciation-Delivery Equipment is an example of a(n) ____________________ account. ANSWER: contra-asset POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 94. The difference between the asset account and the contra-asset account is known as the ____________________. ANSWER: book value POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 95. Under the ____________________ principle, assets are recorded at their actual cost, and this cost remains on the books as long as the business owns an asset. ANSWER: historical cost POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 96. The ____________________ is a form used to pull together all of the information needed to enter adjusting entries and prepare the financial statements. ANSWER: work sheet POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 5—Adjusting Entries and the Work Sheet 97. ____________________ are assets of a durable nature that are expected to provide benefit to the business over several years. ANSWER: Plant assets POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.18 - LO: 5-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 98. A method of accounting under which revenues are recorded when cash is received and expenses are recorded when cash is paid is known as ____________________. ANSWER: cash basis accounting POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.19 - LO: 5-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 99. The ____________________ is a method of accounting under which revenues are recorded when paid by customers and expenses are recorded when cash is paid. ANSWER: cash basis of accounting POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.19 - LO: 5-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. Adjusted Trial Balance columns b. Adjusting entries c. Balance Sheet columns d. book value e. contra-asset Cengage Learning Testing, Powered by Cognero

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Chapter 5—Adjusting Entries and the Work Sheet f. depreciable cost g. depreciation h. fiscal year i. historical cost principle j. Income Statement columns k. market value l. matching principle m. plant assets n. salvage value o. straight-line method p. undepreciated cost q. useful life r. work sheet DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.18 - LO: 5-1 COLL.HEIN.17.20 - LO: 5-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 100. The work sheet columns that show the amounts that will be reported in the statement of owner's equity and balance sheet. ANSWER: c POINTS: 1 101. A principle that requires the matching of revenues earned during an accounting period with the expenses incurred to produce the revenues. ANSWER: l POINTS: 1 102. A principle that requires assets to be recorded at their actual cost. ANSWER: i POINTS: 1 103. A method of matching an asset's original cost against the revenues produced over its useful life. ANSWER: g POINTS: 1

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Chapter 5—Adjusting Entries and the Work Sheet 104. The period of time that an asset is expected to help produce revenues. ANSWER: q POINTS: 1 105. The expected market value of an asset at the end of its useful life. ANSWER: n POINTS: 1 106. A twelve-month period for which financial reports are prepared. ANSWER: h POINTS: 1 107. A form used to pull together all of the information needed to enter adjusting entries and prepare the financial statements. ANSWER: r POINTS: 1 108. The cost of an asset that is subject to depreciation. ANSWER: f POINTS: 1 109. The amount an item can be sold for under normal economic conditions. ANSWER: k POINTS: 1 110. An account with a credit balance that is deducted from the related asset account on the balance sheet. ANSWER: e POINTS: 1 111. A depreciation method in which the depreciable cost is divided by the estimated useful life. ANSWER: o POINTS: 1 112. Journal entries made at the end of the accounting period to reflect changes in account balances that are not the direct result of an exchange with an outside party. ANSWER: b POINTS: 1 113. Assets of a durable nature that will be used for operations over several years. ANSWER: m POINTS: 1 114. The third pair of amount columns on the work sheet. Used to prove the equality of the debits and credits in the general ledger accounts after making all end-of-period adjustments. ANSWER: a POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Chapter 5—Adjusting Entries and the Work Sheet

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Chapter 6—Financial Statements and the Closing Process 1. The income statement includes all changes in owner's equity except those resulting from investments or withdrawals of assets by the owner. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Understanding NOTES: 1 min. 2. To close the income summary account with a credit balance, debit the account for its balance and credit the drawing account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. To close an expense account with a debit balance, debit the account for its balance and credit the income summary account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

Page 1

Chapter 6—Financial Statements and the Closing Process 4. The steps involved in handling all of the transactions and events completed during an accounting period, beginning with placing data in a book of original entry and ending with a post-closing trial balance, are referred to collectively as the accounting cycle. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.25 - LO: 6-4 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. Long-term liabilities are liabilities that are due in a period longer than one year. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-16-Current Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. The income summary account is an account used only during the closing process. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 7. The income summary account appears on the income statement at the end of the accounting period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. A form of balance sheet that lists the assets at the left and the liabilities and owner's equity at the right is called a report form of balance sheet. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. A statement of owner's equity is a statement summarizing all of the changes in owner's equity during a specified period of time. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 3

Chapter 6—Financial Statements and the Closing Process 10. Expenses on the income statement could be listed in alphabetical order by dollar amount. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. Adjustments at the end of the period are not formally entered in the journal or posted to the accounts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.25 - LO: 6-4 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. Property, plant, and equipment are assets that are expected to serve the business for many years. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 13. The Account Title and Balance Sheet columns of the work sheet provide all of the information necessary to prepare the statement of owner's equity. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. To close a revenue account with a credit balance, debit the account for its balance and credit the income summary account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. A separate explanation of each closing entry is necessary. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 5

Chapter 6—Financial Statements and the Closing Process 16. The statement of owner's equity is prepared from information from the asset and liability accounts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. An income statement is an itemized statement that provides information regarding the status of the assets, liabilities, and owner's equity of a business enterprise as of a specified date. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. The purpose and use of the income summary account is to summarize the difference between revenues and expenses. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 19. Long-term liabilities may also be called long-term debt. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. A mortgage on an office building is an example of a property, plant, and equipment asset. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. Adjusting entries are recorded and posted after closing entries. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.25 - LO: 6-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 22. To close the drawing account with a debit balance, credit the account for its balance and debit the owner's capital account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. Closing entries are made in the journal and posted to the ledger accounts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. After posting the adjusting entries, the balance of the depreciation expense account should agree with the amount shown on the income statement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 25. A post-closing trial balance is used to prove the equality of debit and credit balances in the general ledger accounts after the closing entries have been posted. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.26 - LO: 6-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. The end-of-period work sheet is completed after adjusting entries have been recorded and posted. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.25 - LO: 6-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. Revenue and expense account are permanent accounts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 28. The amounts in the financial statements must agree with the ledger account balances. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. An income statement is an itemized statement for the purpose of providing information regarding the results of operations during a specified period of time. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. Expenses on the income statement could be listed in the same order as they appear in the chart of accounts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 31. The heading for a balance sheet includes the name of the business, the title of the statement, and a period of time. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. A form of balance sheet that shows the liabilities and owner's equity sections below the assets section is called an account form of balance sheet. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. Current assets include cash and other assets that will be converted into cash or consumed within one year or the normal operating cycle of the business, whichever is longer. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-15-Current Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 34. A balance sheet that classifies (or groups) items by similarities is called a unified balance sheet. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. Obligations that need not be paid for a long time, usually more than one year, are classified as current liabilities. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. Assets, liabilities, and the owner's capital account are closed at the end of the accounting period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 37. Revenues and expenses are temporary accounts and are closed at the end of the accounting period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. The effect of drawing transactions on the capital account is formalized at any time during the accounting period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 39. (Appendix) The accuracy of the statement of cash flows can be proved by comparing the cash provided by operating activities with the change in the cash balance. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 40. (Appendix) The three types of business activities are operating activities, investing activities, and capital activities. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Evaluating NOTES: 1 min. 41. The owner's equity in a business amounted to $52,000 at the beginning of the year and $100,000 at the end of the year. The owner had made no additional investments and had withdrawn $19,000 during the year. The net income for the year amounted to a. $81,000. b. $67,000. c. $48,000. d. $171,000. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 42. The total assets amount to $26,000 and the total liabilities amount to $18,000. The amount of the owner's equity is a. $18,000. b. $44,000. c. $26,000. d. $8,000. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Understanding NOTES: 1 min. 43. The total revenue of the month of June amounted to $7,500; total expenses amounted to $3,500; and withdrawals amounted to $600. The net income for the month amounted to a. $7,500. b. $3,400. c. $4,000. d. $3,500. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 44. Changes in owner's equity that result from investments or withdrawals of assets by the owner are included in the a. statement of owner's equity. b. income statement. c. balance sheet. d. chart of accounts. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Understanding NOTES: 1 min. 45. Owner's equity can be increased through a. withdrawals by the owner. b. investments by the owner. c. expenses exceeding revenues. d. purchases of assets for cash. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 46. The balance in an expense account is closed to a(n) a. capital account. b. revenue account. c. drawing account. d. income summary account. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Understanding NOTES: 1 min. 47. The order in which financial statements should be prepared is a. balance sheet, income statement, statement of owner's equity. b. income statement, balance sheet, statement of owner's equity. c. statement of owner's equity, balance sheet, income statement. d. income statement, statement of owner's equity, balance sheet. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 48. After the closing entries are journalized and posted, which of the following accounts would NOT have a balance? a. Cash b. Office Supplies c. Accounts Payable d. Service Revenue ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 49. A form of balance sheet that lists the liabilities and the owner's equity sections below the assets section is called the a. account form. b. journal form. c. report form. d. current form. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 50. After the closing entries have been posted, which of the following accounts would still have a balance? a. Miscellaneous Revenues b. Accumulated Depreciation Equipment c. Salaries Expense d. Supplies Expense ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 51. After the accounts are closed and the journal entries have been posted, which of the following accounts would have a balance? a. Payroll Taxes Expense b. Miscellaneous Expense c. Professional Expense d. Supplies ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 52. The amount reported in the Balance Sheet columns of the work sheet for the owner's capital represents the a. ending balance that should be reported on the balance sheet. b. beginning balance. c. beginning balance plus additional investments. d. beginning balance less withdrawals. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 53. When recording closing entries in the general journal, which of the following is written in the Description column? a. "closing entries" b. a description of the transaction c. nothing d. "zero out accounts" ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 54. To prove the equality of the debit and credit balances in the general ledger accounts after the closing entries have been journalized and posted, prepare the a. balance sheet. b. income statement. c. adjustments. d. post-closing trial balance. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.26 - LO: 6-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 55. The journal entry to close the income summary account (showing a net loss) includes a. debiting the drawing account and crediting Income Summary. b. debiting Income Summary and crediting the drawing account. c. debiting the owner's capital account and crediting Income Summary. d. debiting Income Summary and crediting the owner's capital account. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 56. The journal entry to close expense accounts includes a. debiting the expense accounts and crediting Income Summary. b. debiting Income Summary and crediting the expense accounts. c. debiting the expense accounts and crediting the owner's capital account. d. debiting the expense accounts and crediting the drawing account. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Understanding NOTES: 1 min. 57. The journal entry to close revenue accounts includes a. debiting the revenue accounts and crediting Income Summary. b. debiting Income Summary and crediting the revenue accounts. c. debiting the revenue accounts and crediting Cash. d. debiting the revenue accounts and crediting the drawing account. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 58. Which step is taken at the end of the accounting period? a. analyze source documents b. post to the general ledger accounts c. prepare a trial balance d. prepare a post-closing trial balance ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.25 - LO: 6-4 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 59. Which of the following steps of the accounting cycle are in the correct order? a. prepare a trial balance, post to general ledger accounts, journalize adjusting and closing entries b. make adjustments, complete a work sheet, post to general ledger accounts c. prepare financial statements, make adjustments, prepare a trial balance d. prepare a trial balance, make adjustments, prepare financial statements ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.25 - LO: 6-4 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 60. The journal entry to close the income summary account (showing a profit) includes a. debiting the drawing account and crediting Income Summary. b. debiting Income Summary and crediting the drawing account. c. debiting the owner's capital account and crediting Income Summary. d. debiting Income Summary and crediting the owner's capital account. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 61. What is the correct sequence for closing the temporary accounts? a. revenue accounts, expense accounts, Income Summary, drawing account b. expense accounts, revenue accounts, Income Summary, drawing account c. revenue accounts, expense accounts, drawing account, Income Summary d. drawing account, revenue accounts, expense accounts, Income Summary ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 62. The steps involved in handling all of the transactions and events completed during an accounting period, beginning with placing data in a book of original entry and ending with a post-closing trial balance, are referred to collectively as a. input. b. processing. c. output. d. the accounting cycle. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.25 - LO: 6-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min. 63. The Income Summary account is used to a. close the revenue accounts only. b. close the revenue accounts and expense accounts only. c. close the drawing account. d. close revenue accounts and expense accounts and update the owner's capital account. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 64. The journal entry to close the drawing account includes a. debiting the owner's capital account and crediting the drawing account. b. debiting the drawing account and crediting the owner's capital account. c. debiting Income Summary and crediting the drawing account. d. debiting the drawing account and crediting Income Summary. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 65. What is the purpose of the post-closing trial balance? a. to prove no errors were made while recording entries in the journal b. to prove the equality of the debit and credit balances in the general ledger accounts c. to prove the closing entries were recorded correctly in the journal d. to prove the balances in the general ledger accounts are correct ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.26 - LO: 6-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 66. Cash and other assets that will be converted into cash within one year or the normal operating cycle of the business, whichever is longer, are called a. property. b. plant. c. equipment. d. current assets. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-15-Current Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 67. The account to which revenue and expenses are closed is called a. Cash. b. Drawing. c. Income Summary. d. Net Income. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 68. The account to which the drawing account is closed is called a. Revenue. b. Income Summary. c. Owner's Capital. d. Cash. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 69. A balance sheet that groups similar items is called a(n) a. report form of balance sheet. b. account form of balance sheet. c. classified balance sheet. d. temporary balance sheet. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 70. The body of the income statement consists of an itemized list of a. assets and liabilities. b. assets and owner's equity. c. cash and revenues. d. revenues and expenses. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 71. Capital at the beginning of the month amounted to $4,000; net income for the month amounted to $1,000; and withdrawals for personal use during the month amounted to $2,000. Capital at the end of the month is a. $3,000. b. $2,000. c. $7,000. d. $5,000. ANSWER: a POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 72. (Appendix) A utility bill for $315 was paid. This activity is classified as a. operating. b. investing. c. financing. d. paying. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 73. (Appendix) Business transactions can be classified as a. operating, investing, and accounting. b. operating, financing, and lending. c. operating, investing, and financing. d. operating, lending, and borrowing. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 74. (Appendix) A company receives cash from a bank loan. This activity is classified as a. operating. b. investing. c. financing. d. borrowing. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 75. From the partial work sheet, prepare an income statement, a statement of owner's equity, and a classified balance sheet. The owner made no additional investments in the business during the month.

Account Title Cash Accounts Receivable Supplies Prepaid Insurance Delivery Equipment Accum. Depr.—Delivery Equip. Accounts Payable Wages Payable Carlos Perez, Capital Carlos Perez, Drawing Consulting Fees Wages Expense Rent Expense Supplies Expense Telephone Expense Electricity Expense Insurance Expense Depr. Exp.—Delivery Equip. Miscellaneous Expense Net Income

Carlos Perez Delivery Service Work Sheet (Partial) For Month Ended January 31, 20-Income Statement Debit Credit

Balance Sheet Debit Credit 11,000 1,500 1,200 800 5,000 400 900 1,400 15,600 1,500

6,400 880 1,100 220 175 320 550 400 55 3,700 2,700 6,400

_____ 6,400 _____ 6,400

______ 21,000 ______ 21,000

______ 18,300 2,700 21,000

ANSWER: Cengage Learning Testing, Powered by Cognero

Page 31

Chapter 6—Financial Statements and the Closing Process Carlos Perez Delivery Service Income Statement For Month Ended January 31, 20-Revenues: Consulting Fees Expenses: Wages Expense Rent Expense Supplies Expense Telephone Expense Electricity Expense Insurance Expense Depreciation Expense—Delivery Equipment Miscellaneous Expense Total expenses Net Income

$6,400 $ 880 1,100 220 175 320 550 400 55 3,700 $2,700

Carlos Perez Delivery Service Statement of Owner's Equity For Month Ended January 31, 20-Carlos Perez, Capital, January 1, 20-Net Income for January $2,700 Less withdrawals for January 1,500 Increase in capital Carlos Perez, Capital, January 31, 20--

$15,600

1,200 $16,800

Carlos Perez Delivery Service Balance Sheet January 31, 20-Assets Current assets: Cash Accounts Receivable Supplies Prepaid Insurance Total current assets Property, plant, and equipment: Delivery Equipment Less: Accumulated Depreciation Total assets Liabilities Current liabilities: Accounts Payable Wages Payable Total current liabilities Cengage Learning Testing, Powered by Cognero

$11,000 1,500 1,200 800 $14,500 $ 5,000 400

4,600 $19,100

$ 900 1,400 $ 2,300 Page 32

Chapter 6—Financial Statements and the Closing Process Owner's Equity Carlos Perez, Capital Total liabilities and owner's equity POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Understanding NOTES: 15 min.

16,800 $19,100

76. From the following adjusted trial balance, journalize the necessary closing entries. Prepare a post-closing trial balance. Adjusted Trial Balance Account Title Cash Accounts Receivable Prepaid Insurance Supplies Equipment Accumulated Depreciation—Equipment Accounts Payable Wages Payable Owner, Capital Owner, Drawing Service Revenue Wages Expense Rent Expense Supplies Expense Utilities Expense Depreciation Expense—Equipment

Debit 1,500 1,460 800 900 5,500

Credit

550 1,300 760 6,550 1,400 8,900 3,000 1,500 900 600 500 18,060

______ 18,060

ANSWER: Closing Entries a.

c. Cengage Learning Testing, Powered by Cognero

Service Revenue Income Summary

8,900

Income Summary Wages Expense Rent Expense Supplies Expense Utilities Expense Depreciation Expense—Equipment

6,500

Income Summary

2,400

8,900

3,000 1,500 900 600 500

Page 33

Chapter 6—Financial Statements and the Closing Process Owner, Capital d.

2,400

Owner, Capital Owner, Drawing

1,400 1,400

Post-Closing Trial Balance Account Title Debit Cash 1,500 Accounts Receivable 1,460 Prepaid Insurance 800 Supplies 900 Equipment 5,500 Accumulated Depreciation—Equipment Accounts Payable Wages Payable Owner, Capital ______ 10,160 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 COLL.HEIN.17.26 - LO: 6-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 10 min.

Credit

550 1,300 760 7,550 10,160

77. Use the adjusted trial balance below. a. b. c. d.

For each account, open a T account, title the account, and place its balance in it. Prepare closing entries in general journal format. Post closing entries to the T accounts. Give each entry a reference letter. Prepare a post-closing trial balance. Adjusted Trial Balance Account Title

Cash Accounts Receivable Prepaid Insurance Supplies Land Equipment Accumulated Depreciation—Equipment Accounts Payable Owner, Capital Owner, Drawing Service Fees Cengage Learning Testing, Powered by Cognero

Debit 26,000 3,300 6,600 1,200 42,300 5,700

Credit

5,500 5,300 73,900 3,200 20,000 Page 34

Chapter 6—Financial Statements and the Closing Process Wages Expense Supplies Expense Utilities Expense Insurance Expense Depreciation Expense—Equipment ANSWER:

b. a.

8,500 2,100 200 100 5,500 104,700

_______ 104,700

Service Fees Income Summary

20,000

Income Summary Wages Expense Supplies Expense Utilities Expense Insurance Expense Depreciation Expense—Equipment

16,400

Income Summary Owner, Capital

3,600

Owner, Capital Owner, Drawing

3,200

20,000

8,500 2,100 200 100 5,500

3,600

3,200

a. and c. Cash 26,000

Accounts Receivable 3,300

Prepaid Insurance 6,600

Supplies 1,200

Land Cengage Learning Testing, Powered by Cognero

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Chapter 6—Financial Statements and the Closing Process 42,300

Equipment 5,700

Accum. Depr.—Equip. 5,500

Accounts Payable 5,300

Owner, Capital (d) 3,200

73,900 (c) 3,600

Owner, Drawing 3,200 (d) 3,200

Service Fees (a) 20,000

20,000

Wages Expense 8,500 (b) 8,500

Supplies Expense 2,100 (b) 2,100 Cengage Learning Testing, Powered by Cognero

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Chapter 6—Financial Statements and the Closing Process

Utilities Expense 200 (b)

200

Insurance Expense 100 (b)

100

Depr. Exp.—Equip. 5,500 (b) 5,500

Income Summary (b) 16,400 (a) 20,000 (c) 3,600

d. Post-Closing Trial Balance Account Title Cash Accounts Receivable Prepaid Insurance Supplies Land Equipment Accumulated Depreciation—Equipment Accounts Payable Owner, Capital

Debit 26,000 3,300 6,600 1,200 42,300 5,700

______ 85,100

Credit

5,500 5,300 74,300 85,100

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Challenging COLL.HEIN.17.24 - LO: 6-2 COLL.HEIN.17.26 - LO: 6-3 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Understanding Cengage Learning Testing, Powered by Cognero

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Chapter 6—Financial Statements and the Closing Process NOTES:

15 min.

78. Number in their proper order the following steps in the accounting cycle. a. b. c. d. e. f. g. h. i. j.

Prepare a trial balance. Post to the general ledger accounts. Journalize and post the closing entries. Complete an end-of-period work sheet. Prepare a post-closing trial balance. Journalize and post the adjusting entries. Analyze source documents. Record the adjusting entries on a work sheet. Journalize the transactions. Prepare the financial statements.

a. 4 b. 3 c. 9 d. 6 e. 10 f. 7 g. 1 h. 5 i. 2 j. 8 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.25 - LO: 6-4 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Understanding NOTES: 3 min. ANSWER:

79. On December 31, 20--, after adjustments, Tuscany Company's general ledger contains the account balances as shown on the partially completed work sheet below. Journalize the (four) closing entries necessary at the end of December. Tuscany Company Work Sheet For Month Ended December 31, 20-Adjusted Trial Balance Account Name Cash Accounts Receivable

Debit

Credit

Income Statement Debit

Credit

Balance Sheet Debit

13,000

2,500

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Credit

Page 38

Chapter 6—Financial Statements and the Closing Process Supplies Prepaid Rent Equipment Accum. Depr.—Equip. Accounts Payable Kristin Tuscany, Capital Kristin Tuscany, Drawing Fee Income Advertising Expense Rent Expense Supplies Expense Salaries Expense Utilities Expense Depr. Exp.—Equip.

300 6,200 11,000

300 6,200 11,000 1,000

1,000

1,200

8,300

1,400

1,400 36,500

36,500

1,700

1,400

400

7,300

800

1,000 47,000

______ 47,000

Net Income

1,000 12,600 23,900 36,500

______ 36,500 ______ 36,500

GENERAL JOURNAL Date

Description

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______ 34,400 ______ 34,400

______ 10,500 23,900 34,400

Page 1 Post Ref.

Debit

Credit

Page 39

Chapter 6—Financial Statements and the Closing Process

ANSWER: GENERAL JOURNAL Date Dec.

Description Closing Entries 31 Fee Income Income Summary

Page 1 Post Ref.

Debit

Credit

36,500 36,500

31 Income Summary Advertising Expense Rent Expense Supplies Expense Salaries Expense Utilities Expense Depreciation Expense—Equipment

12,600

31 Income Summary Kristin Tuscany, Capital

23,900

31 Kristin Tuscany, Capital Kristin Tuscany, Drawing

1,400

1,700 1,400 400 7,300 800 1,000

23,900

1,400

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Understanding NOTES: 5 min. 80. From the following partial work sheet for Walter Searing, journalize the closing entries necessary for month-end and prepare a post-closing trial balance.

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Chapter 6—Financial Statements and the Closing Process Walter Searing Work Sheet (Partial) For Month Ended July 31, 20-Income Statement Account Title Debit Credit Cash Accounts Receivable Supplies Prepaid Insurance Delivery Equipment Accum. Depr.—Delivery Equip. Accounts Payable Wages Payable Walter Searing, Capital Walter Searing, Drawing Delivery Fees Rent Expense Wages Expense Utilities Expense Gas and Oil Expense Miscellaneous Expense Supplies Expense Insurance Expense Depr. Exp.—Delivery Equip. Net Income

Balance Sheet Debit Credit 3,700 600 800 800 4,000 200 1,100 1,025 6,965 900

6,400 1,600 1,100 300 750 300 240 400 200 4,890 1,510 6,400

_____ 6,400 _____ 6,400

______ 10,800 ______ 10,800

GENERAL JOURNAL Date

Description

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_____ 9,290 1,510 10,800

Page 1 Post Ref.

Debit

Credit

Page 41

Chapter 6—Financial Statements and the Closing Process

Account Title

Debit

Credit

ANSWER: GENERAL JOURNAL Date July

Description Closing Entries 31 Delivery Fees Income Summary 31 Income Summary Rent Expense Wages Expense Utilities Expense Gas and Oil Expense Miscellaneous Expense Supplies Expense Insurance Expense Depr. Exp.—Delivery Equip.

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Page 1 Post Ref.

Debit

Credit

6,400 6,400 4,890 1,600 1,100 300 750 300 240 400 200 Page 42

Chapter 6—Financial Statements and the Closing Process 31 Income Summary Walter Searing, Capital

1,510

31 Walter Searing, Capital Walter Searing, Drawing

900

Walter Searing Post-Closing Trial Balance July 31, 20-Account Title Cash Accounts Receivable Supplies Prepaid Insurance Delivery Equipment Accumulated Depreciation—Delivery Equipment Accounts Payable Wages Payable Walter Searing, Capital

1,510

900

Debit 3,700 600 800 800 4,000

_____ 9,900

Credit

200 1,100 1,025 7,575 9,900

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Easy COLL.HEIN.17.24 - LO: 6-2 COLL.HEIN.17.26 - LO: 6-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 10 min.

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Chapter 6—Financial Statements and the Closing Process 81. Indicate which of the following general ledger accounts are temporary (T) or permanent (P). a. b. c. d. e. f. g. h. i. j.

Cash Accounts Receivable Accounts Payable Prepaid Insurance Fees Earned Insurance Expense Accumulated Depreciation—Equipment Owner, Drawing Owner, Capital Income Summary

a. P b. P c. P d. P e. T f. T g. P h. T i. P j. T POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 2 min. ANSWER:

82. (Appendix) Seascape Marina, Inc. had the following transactions during May of the current year. a. b. c.

Invested $25,000 cash in the business. Paid office rent, $1,200. Purchased office equipment. Paid $4,500 in cash and agreed to pay the balance in six monthly installments. d. Paid cash for advertising in Seaview magazine, $900. e. Received cash for six research assignments, $3,600. f. Paid telephone bill, $240. g. Made payment on loan from transaction (c), $800. h. Withdrew cash for personal use, $1,800. i. Paid wages to office assistant, $600. Required: Classify each transaction as an operating, investing, or financing activity and prepare a statement of cash flows.

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Chapter 6—Financial Statements and the Closing Process ANSWER:

a. b. c. d. e. f. g. h. i.

financing operating investing operating operating operating financing financing operating

Seascape Marina, Inc. Statement of Cash Flows For Month Ended May 31, 20-Cash flows from operating activities: Cash received from clients Cash paid for rent $(1,200) Cash paid for advertising (900) Cash paid for telephone (240) Cash paid for wages (600) Total cash paid for operating activities Net cash provided by operating activities Cash flows from investing activities: Cash paid for office equipment $(4,500) Net cash used for investing activities Cash flows from financing activities: Cash investment by owner $25,000 Cash withdrawal by owner (1,800) Payment made on loan (800) Net cash provided by financing activities Net increase in cash POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Understanding NOTES: 10 min.

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$ 3,600

(2,940 $ 660

(4,500)

22,400 $18,560

Page 45

Chapter 6—Financial Statements and the Closing Process 83. The period of time required to purchase supplies and services and convert them back into cash is the ____________________. ANSWER: operating cycle POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 84. The ____________________ process gives zero balances to the temporary accounts so that they can accumulate information for the next accounting period. ANSWER: closing POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 85. A(n) ____________________ balance sheet shows the assets on the left and the liabilities and the owner's equity sections on the right. ANSWER: account form POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 86. ____________________ accounts do not accumulate information across accounting periods but are closed. ANSWER: Temporary POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 87. Obligations that are not expected to be paid within a year and do not require the use of current assets are known as ____________________. ANSWER: long-term liabilities POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 88. The accounts shown in the post-closing trial balance are the ____________________ accounts. ANSWER: permanent POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.26 - LO: 6-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 89. The ____________________ balance sheet shows the liabilities and owner's equity sections below the asset section. ANSWER: report form POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 90. The ____________________ is prepared after posting the closing entries to prove the equality of the debit and credit balances in the general ledger accounts. ANSWER: post-closing trial balance POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.26 - LO: 6-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 91. The steps involved in accounting for all the business activities during an accounting period are known as the ____________________. ANSWER: accounting cycle POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.25 - LO: 6-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 92. Long-term liabilities or ____________________ are obligations that are not expected to be paid within a year and do not require the use of current assets. ANSWER: long-term debt POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 93. ____________________ will be converted into cash or consumed within either one year or the normal operating cycle of the business, whichever is longer. ANSWER: Current assets POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-15-Current Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 94. ____________________ are due within either one year or the normal operating cycle of the business, whichever is longer, and are to be paid out of current assets. ANSWER: Current liabilities POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.23 - LO: 6-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-16-Current Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 6—Financial Statements and the Closing Process 95. The ____________________ account is a temporary account used in the closing process to summarize the effects of all revenue and expense accounts. ANSWER: Income Summary POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 96. ____________________ accounts accumulate information across accounting periods and are reported on the balance sheet. ANSWER: Permanent POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.24 - LO: 6-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-08-Closing Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. account form of balance sheet b. accounting cycle c. classified balance sheet d. closing process e. current assets f. current liabilities g. Income Summary h. long-term liabilities i. operating cycle j. permanent accounts k. post-closing trial balance l. property, plant, and equipment m. report form of balance sheet n. temporary accounts DIFFICULTY: LEARNING OBJECTIVES: Cengage Learning Testing, Powered by Cognero

Easy COLL.HEIN.17.23 - LO: 6-1 COLL.HEIN.17.24 - LO: 6-2 Page 50

Chapter 6—Financial Statements and the Closing Process COLL.HEIN.17.25 - LO: 6-4 COLL.HEIN.17.26 - LO: 6-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements ACBSP: APC-08-Closing Entries ACBSP: APC-02-GAAP ACBSP: APC-15-Current Assets Reporting ACBSP: APC-13-Long-term Assets Reporting ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 97. The period of time required to purchase supplies and services and convert them back into cash. ANSWER: i POINTS: 1 98. Prepared after posting the closing entries to prove the equality of the debit and credit balances in the general ledger accounts. ANSWER: k POINTS: 1 99. A balance sheet with separate categories for current assets; property, plant, and equipment; current liabilities; and long-term liabilities. ANSWER: c POINTS: 1 100. A balance sheet in which the assets are on the left and the liabilities and the owner's equity sections are on the right. ANSWER: a POINTS: 1 101. Accounts that accumulate information across accounting periods; all accounts reported on the balance sheet. ANSWER: j POINTS: 1 102. A balance sheet in which the liabilities and the owner's equity sections are shown below the assets section. ANSWER: m POINTS: 1 103. The steps involved in accounting for all of the business activities during an accounting period. ANSWER: b POINTS: 1

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Chapter 6—Financial Statements and the Closing Process 104. Assets that are expected to serve the business for many years. ANSWER: l POINTS: 1 105. Obligations that are due within either one year or the normal operating cycle of the business, whichever is longer, and that are to be paid out of current assets. ANSWER: f POINTS: 1 106. Cash and assets that will be converted into cash or consumed within either one year or the normal operating cycle of the business, whichever is longer. ANSWER: e POINTS: 1 107. Obligations that are not expected to be paid within a year and do not require the use of current assets. ANSWER: h POINTS: 1 108. A temporary account used in the closing process to summarize the effects of all revenue and expense accounts. ANSWER: g POINTS: 1 109. Accounts that do not accumulate information across accounting periods but are closed, such as the drawing account and all income statement accounts. ANSWER: n POINTS: 1 110. The process of giving zero balances to the temporary accounts so that they can accumulate information for the next accounting period. ANSWER: d POINTS: 1

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Chapter 7—Accounting for Cash 1. The term "cash" has several different meanings. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. Cash usually means only currency and coins. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. On any given day, it is unlikely that the balance in the cash account on the depositor's general ledger (or books) will be the same as the bank balance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 1

Chapter 7—Accounting for Cash 4. A depositor is not responsible or liable to the bank for items deposited that are not honored when presented for payment. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. A restrictive endorsement means that the check is payable to any bearer. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. To a business, cash includes currency, coins, checks, money in the checking accounts, money orders, and bank cashier's checks. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 2

Chapter 7—Accounting for Cash 7. It is good business policy that all cash and cash items received be deposited daily in a bank. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. The key documents and forms required in opening and using a checking account are the signature card, deposit tickets, checks, and bank statements. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. The person directed to receive the money indicated by a check is known as the payee. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 3

Chapter 7—Accounting for Cash 10. The bank in which the depositor has money on deposit is known as the drawer. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. The depositor who orders the bank to pay a certain amount of money is known as the drawee. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. Every person authorized to sign checks for a business must complete and sign a signature card for the bank. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 4

Chapter 7—Accounting for Cash 13. On a deposit ticket, checks should be listed in numerical order. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. A restrictive endorsement makes a check payable to any bearer. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. A check is a document ordering the depositor to pay cash from the bank's account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 16. A depositor may endorse checks with a rubber stamp. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. Businesses commonly use cash registers with tapes that accumulate a record of the day's cash receipts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.29 - LO: 7-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. A cash shortage is entered as a debit to Cash Short and Over and a credit to Cash. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.29 - LO: 7-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 19. To establish a change fund, Cash should be credited and Change Fund should be debited. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.29 - LO: 7-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. A special ledger account entitled "Change Fund" is used to keep track of day-to-day shortages and overages of cash. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.29 - LO: 7-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. If the cash short and over account has a debit balance at the end of the fiscal year, the balance represents a revenue. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.29 - LO: 7-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 22. Posting must be done from the petty cash payments record. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. The petty cash fund should be replenished only at the end of each accounting period so that the accounts are brought up-to-date. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. The petty cash payments record is a special journal that takes the place of entering these transactions in the twocolumn journal. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 25. When a check is written to replenish the petty cash fund, it is entered in the journal by debiting the proper accounts indicated in the Distributions columns of the petty cash record and by crediting Cash Over and Short. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. The difference between the balance in the cash account on the depositor's books and the bank's books is usually due to errors. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Understanding NOTES: 1 min. 27. If the depositor's book balance is not the same as the bank's book balance, an error has occurred. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 7—Accounting for Cash 28. A debit journal entry to the cash short and over account is used to record a cash shortage. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.29 - LO: 7-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Understanding NOTES: 1 min. 29. Cash receipts of $719 and a cash count of $715 would indicate a cash overage. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.29 - LO: 7-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Understanding NOTES: 1 min. 30. Once an entry is made to establish a change fund, no other entries are made to this account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.29 - LO: 7-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 31. If the cash short and over account has a credit balance at the end of the fiscal year, the balance represents an expense or loss. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.29 - LO: 7-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Understanding NOTES: 1 min. 32. When it is necessary to replenish the petty cash fund, the petty cashier prepares a statement of payments. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. The check written to establish the petty cash fund is recorded in the journal by crediting Cash and debiting Petty Cash. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 34. A check deposited that is not paid because the drawer did not have sufficient funds is called an NSF check. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. Outstanding checks are checks issued that have not yet been presented to the bank for payment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. In reconciling the bank statement, the outstanding checks are added to the balance shown on the bank statement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 37. A receipt called a petty cash voucher should be prepared for every payment from the petty cash fund. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. Payments from the petty cash fund should not be made without obtaining some sort of receipt in return. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 39. A special form of receipt showing the name of the payee, the purpose of the payment, and the account to be charged for each petty cash payment is known as a petty cash voucher. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 40. Each check should be identified by its a. AAB number. b. MBA number. c. CPA number. d. ABA number. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 41. A check involves three parties. The person who orders the bank to pay a certain amount of money is called the a. drawer. b. drawee. c. payee. d. endorser. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 42. A check involves three parties. The person directed to receive the money is called the a. drawer. b. drawee. c. payee. d. endorser. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 43. To use an ATM machine, the depositor must have a a. Bank number. b. PIN number. c. BIN number. d. TIN number. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 44. The process of bringing the book and the bank balance into agreement is called a. reconciling the bank statement. b. proving the cash. c. preparing a statement of payment. d. preparing a statement of disbursements. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 45. On a bank reconciliation, checks issued during the period that were not presented to the bank for payment before the bank statement was prepared are known as a. NSF checks. b. outstanding checks. c. deposits in transit. d. dishonored checks. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 46. Whenever the bank mails a credit memo to the depositor indicating the amount of interest credited to the account, the transaction that would be entered in the accounting records of the depositor would include a. debiting Interest Earned and crediting Cash. b. debiting Interest Expense and crediting Cash. c. debiting Cash and crediting Interest Earned. d. debiting Cash and crediting Interest Expense. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 47. In reconciling a bank statement, the bank statement balance is $1,000 and the balance per books is $1,205. A bank service charge is $5; a deposit in transit totals $500; and outstanding checks total $300. The journal entry for a bank service charge would include a. debiting Cash and crediting Miscellaneous Expense. b. debiting Cash and crediting Owner's Capital. c. debiting Accounts Payable and crediting Cash. d. debiting Miscellaneous Expense and crediting Cash. ANSWER: d POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 7—Accounting for Cash 48. To reconcile the bank statement, which of the following amounts would be subtracted from the checkbook balance? a. service charge b. outstanding checks c. deposits in transit d. amounts collected by the bank for the depositor's account ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 49. To reconcile the bank statement, which of the following amounts would be subtracted from the bank statement balance? a. service charge b. outstanding checks c. deposits in transit d. amounts collected by the bank for the depositor's account ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 50. A debit to Accounts Receivable for $50 and a credit to Cash for $50 would be an accurate journal entry to record a. electronic funds transfers (EFTs). b. not sufficient funds (NSF) checks. c. petty cash. d. ATM deposits. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Understanding NOTES: 1 min. 51. A petty cash fund of $200 has $17 in cash, $180 in petty cash vouchers, and $3 in miscellaneous receipts not included with the petty cash vouchers. The proper journal entry to replenish the fund would include a credit to Cash for a. $3. b. $17. c. $180. d. $183. ANSWER: d POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 7—Accounting for Cash 52. A special form of receipt showing the name of the payee, the purpose of the payment, and the account to be charged for each petty cash payment is known as a a. petty cash voucher. b. petty cash check. c. petty cash document. d. petty cash register. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 53. The petty cash payments record indicates classified expenditures as follows: Automobile Expense, $20; Supplies Expense, $12; Postage Expense, $6; and Miscellaneous Expense, $5. The journal entry to replenish the petty cash fund would include a credit to Cash for a. $38. b. $5. c. $11. d. $43. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 7—Accounting for Cash 54. If, in the effort to prove cash, a shortage is found, the amount is treated as a(n) a. cash receipts transaction. b. petty cash transaction. c. revenue earned transaction. d. expense. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.29 - LO: 7-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Understanding NOTES: 1 min. 55. To sign the back of a check with the name of the company and "Pay to any bank" is an example of a a. restrictive endorsement. b. signature card. c. blank endorsement. d. canceled check. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 56. To reconcile the bank statement, which of the following amounts would be subtracted from the checkbook balance? a. service charge b. outstanding checks c. deposits in transit d. amounts collected by the bank for the depositor's account ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Understanding NOTES: 1 min. 57. The bank statement for a checking account normally shows the a. amounts of deposits to be made. b. amount of deposits and other credits added during the period. c. checks written but not yet cashed. d. amounts to be collected by the bank for the depositor's account. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 58. On a bank reconciliation, deposits that were not entered by the bank before the bank statement was prepared are known as a. NSF deposits. b. restrictive deposits. c. deposits in transit. d. unrecorded deposits. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 59. If the person who is named as payee on a check transfers the right to receive the money by signing his/her name on the back of the check, the signature is called a a. restrictive endorsement. b. dishonored endorsement. c. regular endorsement. d. blank endorsement. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 60. A check involves three parties. The bank in which the drawer has money on deposit is called the a. drawer. b. drawee. c. payee. d. endorser. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 61. To complete transactions with the bank, electronic funds transfer (EFT) systems use a. a computer. b. checks. c. currency. d. drafts or money orders. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 62. Check No. 450, a payment of $54 for the telephone bill, was incorrectly entered on the check stub as $45. Which of the following adjustments needs to be made? a. increase the bank statement balance b. increase the book balance c. decrease the bank statement balance d. decrease the book balance ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Understanding NOTES: 1 min. 63. In reconciling a bank statement, the bank statement balance is $1,000 and the balance per books is $1,205. A bank service charge is $15; a deposit in transit totals $500, and outstanding checks total $300. The adjusted book balance is a. $1,490. b. $1,205. c. $1,190. d. $1,505. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 7—Accounting for Cash 64. To reconcile the bank statement, which of the following amounts would be added to the bank statement balance? a. service charge b. outstanding checks c. deposits in transit d. amounts collected by the bank for the depositor's account ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 65. A petty cash fund of $200 has $27 in cash, $170 in petty cash vouchers, and $3 in miscellaneous receipts not included with the petty cash vouchers. The debit to the Cash Short and Over would be a. $173. b. $170. c. $27. d. $0. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 7—Accounting for Cash 66. The petty cash payments record indicates classified expenditures as follows: Automobile Expense, $20; Supplies Expense, $12; Postage Expense, $6; and Miscellaneous Expense, $5. The transaction would include a. debiting Automobile Expense. b. crediting Supplies Expense. c. debiting Cash. d. crediting Accounts Payable. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Understanding NOTES: 1 min. 67. The check written to establish the petty cash fund is entered in the journal by a. debiting Cash and crediting Petty Cash. b. debiting Petty Cash and crediting Owner's Capital. c. debiting Owner's Capital and crediting Petty Cash. d. debiting Petty Cash and crediting Cash. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 68. A special multi-column record that supplements the regular accounting records and from which no posting is done is called a a. bank reconciliation form. b. petty cash payment record. c. journal. d. ledger. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 69. Cash Sales from the cash register tapes totaled $882. There is a change fund of $100. The cash count indicates that $984 is in the cash drawer. What journal entry would be required? a. debit Miscellaneous Expense for $2; credit Cash Short and Over for $2 b. debit Cash for $982, Cash Short and Over for $2; credit Revenues for $984 c. debit Cash Short and Over for $2; credit Miscellaneous Expense $2 d. debit Cash for $884; credit Revenues for $882, and Cash Short and Over for $2 ANSWER: d POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.29 - LO: 7-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 7—Accounting for Cash 70. The following information relates to the bank account of Doug's Sky Diving Supply Store on June 30. Balance per bank statement Balance per books as of June 30 Outstanding checks: #1007 #1008 #1009 Deposits in transit

$5,327 9,265 $ 241 67 597 229 4,111 98 412 16

Bank service charges NSF check Credit memo for interest earned

Error: Check written and recorded by bank as $454 was subtracted from the checkbook as $445. The check was used to pay the telephone bill. Required: Prepare a bank reconciliation as of June 30. ANSWER:

Bank statement balance Add deposits in transit

Deduct outstanding checks: #1007 #1008 #1009 Adjusted bank statement balance

$5,327 $ 229 4,111

$ 241 67 597

Book balance Add interest earned Deduct: Bank service charge NSF check Error Adjusted book balance POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Understanding NOTES: 5 min.

4,340 $9,667

905 $8,762 $9,265 16 $9,281

$ 98 412 9

519 $8,762

71. Sal's Surf Shop deposits all receipts in the bank and makes all payments by check. On July 31 the cash account had a balance of $6,105.42. The bank statement on July 31 reported a balance of $4,146.46. Upon comparing the bank Cengage Learning Testing, Powered by Cognero

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Chapter 7—Accounting for Cash statement to the books, the following items were found. a. b. c. d. e. f.

g. h.

A bank debit memo issued for an NSF check from a customer of $21.25. A bank credit memo issued for interest of $8.50 earned during the month. During the evening of July 31, a deposit of $1,948.25 was made, which is not shown on the bank statement. A bank debit memo issued for $18.50 for bank service charges. Checks for the amounts of $34.00, $17.85, and $93.25 were written during July but have not yet been received by the bank. The reconciliation from the previous month, June, showed outstanding checks of $260.80. One of these checks in the amount of $7.38 has not yet been received by the bank. After comparing the canceled checks to the bank statement, it was discovered that a check written for the amount of $18.90 was deducted as $19.80 by the bank. It was discovered that a check written to a creditor in the amount of $145.60 was recorded in the books as $14.56.

Required: 1. Prepare a bank reconciliation as of July 31. 2. Prepare the necessary general journal entries from the bank reconciliation. ANSWER:

Bank statement balance Add: Deposit in transit Error

$4,146.46 $1,948.25 0.90

Deduct outstanding checks:

$ 34.00 17.85 93.25 7.38

Adjusted bank statement balance Book balance Add interest earned

152.48 $5,943.13 $6,105.42 8.50 $6,113.92

Deduct: Bank service charges NSF check Error Adjusted book balance

$ 18.50 21.25 131.04

GENERAL JOURNAL

Date Description July 31 Cash Interest Revenue Cengage Learning Testing, Powered by Cognero

1,949.15 $6,095.61

170.79 $5,943.13

Page 1 Post Ref.

Debit 8.50

Credit 8.50 Page 30

Chapter 7—Accounting for Cash Bank Service Charges Accounts Receivable Accounts Payable Cash

18.50 21.25 131.04 170.79

POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 10 min.

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Chapter 7—Accounting for Cash 72. Using the following information, prepare the journal entries to: a. b.

Establish a $200 petty cash fund on January 2. Reimburse the petty cash fund at the end of the month. Date Jan. 2 6 7 7 8 12 23 28

Voucher No. 1 2 3 4 5 6 7 8

Purpose Office supplies Withdrawal by owner Lunch with client Postage Donation to United Way Telephone repair Office supplies Lunch with client

ANSWER:

Amount $15 20 35 12 25 32 15 40

GENERAL JOURNAL

Date Jan 2 Petty Cash Cash

Description

31 Postage Expense Owner, Drawing Entertainment Expense Office Supplies Charitable Contribution Expense Repair Expense Cash

Page 1 Post Ref.

Debit 200.00

Credit 200.00

12.00 20.00 75.00 30.00 25.00 32.00 194.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Understanding NOTES: 5 min.

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Chapter 7—Accounting for Cash 73. Post the differences between the cash count and the cash register tape to the Cash Short and Over T account. Assume a change fund of $100. Date Sept. 7 8 9 10 11

Cash Register Tape $1,295.89 1,678.55 941.76 1,446.62 1,614.13

Cash Count $1,402.89 1,787.55 1,044.76 1,545.62 1,714.13

Cash Short and Over

What is the amount of cash sales for the week?

$___________

What is the balance in the cash short and over account?

$___________

Does the balance in the cash short and over account represent a shortage or overage?

$___________

How much cash was deposited?

$___________

ANSWER:

Cash Short and Over 9/10 1.00 9/7 9/8 9/9

7.00 9.00 3.00 19.00

Bal. 18.00

1. $6,976.95 2. $18.00 credit 3. an overage 4. $6,994.95 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.29 - LO: 7-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Understanding NOTES: 10 min. Cengage Learning Testing, Powered by Cognero

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Chapter 7—Accounting for Cash 74. On May 1, a petty cash fund was established for $200. The following vouchers were issued during May. Date Voucher Purpose May 1 1 Office supplies 3 2 Birthday gift for office worker (misc.) 5 3 Mileage reimbursement 7 4 Postage due 8 5 Office supplies 11 6 Donation—Goodwill (contribution exp.) 15 7 Telephone call (telephone exp.) 21 8 Mileage reimbursement 23 9 Withdrawal by owner (Carla Sanchez) 25 10 Postage due 26 11 Office supplies 28 12 Copier repair (misc.)

Amount $ 3.00 15.00 5.00 2.00 4.00 10.00 5.00 11.00 20.00 3.50 17.00 18.50

Required: 1. Prepare the journal entry to establish the petty cash fund on May 1. 2. Record the vouchers in the petty cash record. Total and rule the petty cash record. 3. Prepare the journal entry to replenish the petty cash fund. Make the appropriate entry in the petty cash record. GENERAL JOURNAL Date

Debit

Credit

PETTY CASH PAYMENTS FOR THE MONTH OF May, 20->

Page 1

Day

Description

Page 1 Post Ref.

Description Received in fund…

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Voucher No.

Total Amount

> > > > > > Page 34

Chapter 7—Accounting for Cash > > > > > > > > > > > > > >

PETTY CASH PAYMENTS FOR THE MONTH OF May, 20Page 1 Distribution of Payments

Supplies

Postage Exp.

Travel Exp.

Misc. Exp.

Account

Amount

< < < < < < < < < < < < < < < < < < < ANSWER: PETTY CASH PAYMENTS FOR THE MONTH OF May, 20-Page 1

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Chapter 7—Accounting for Cash Day

Description

Voucher No.

Total Amount

Received in fund…200 1 Office supplies 3 Birthday gift 5 Mileage 7 Postage due 8 Office supplies 11 Goodwill donation 15 Telephone call 21 Mileage 23 Personal withdrawal 25 Postage 26 Office supplies 28 Copier repair

1 2 3 4 5 6 7 8 9 10 11 12

3.00 15.00 5.00 2.00 4.00 10.00 5.00 11.00 20.00 3.50 17.00 18.50 114.00

Balance Replenish

86.00 114.00

Total

200.00

PETTY CASH PAYMENTS FOR THE MONTH OF May, 20-Page 1 < < < < < < < < < < < < < < < < Cengage Learning Testing, Powered by Cognero

Distribution of Payments Supplies

Postage Exp.

Travel Exp.

Misc. Exp.

Account

Amount

Contribution Exp. Telephone Exp.

10.00 5.00

C. Sanchez, Drawing

20.00

3.00 15.00 5.00 2.00 4.00

11.00 3.50 17.00 _____ 24.00

____ 5.50

_____ 16.00

18.50 33.50

_____ 35.00 Page 36

Chapter 7—Accounting for Cash < < < < <

GENERAL JOURNAL Date May

Description 1 Petty Cash Cash Establish petty cash fund 31 Supplies Postage Expense Travel Expense Miscellaneous Expense Contribution Expense Telephone Expense Carla Sanchez, Drawing Cash Replenish petty cash fund

Page 1 Post Ref.

Debit Credit 200.00 200.00

24.00 5.50 16.00 33.50 10.00 5.00 20.00 114.00

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Chapter 7—Accounting for Cash 75. The balance in the checking account of York Company as of July 31 is $5,852.16. The bank statement shows an ending balance of $4,870.00. The following information is discovered by comparing checks deposited and written and noting service charges and other debit and credit memos shown on the bank statement. Deposits in transit: 7/23 7/27

$220.00 615.00

Outstanding checks: No. 530 No. 531 No. 532

$120.00 36.00 278.30

Unrecorded ATM withdrawal: 7/30

$540.00

Bank service charge

$ 42.00

Error on check no. 954

Recorded in checkbook as $83.82, but was actually written for $83.28, and cleared the bank correctly.

Required: Determine the ending balances to reconcile the bank statement and checkbook. ANSWER:

Bank Statement Balance Deposit in transit Outstanding checks Adjusted Bank Statement Balance

$4,870.00 + 835.00 − 434.30 _________ $5,270.70

Book Balance *Correct err/Ck 954 Bank service charge Unrecorded ATM Adjusted Book Balance

$5,852.16 + 0.54 − 42.00 − 540.00 $5,270.70

*$83.82 − $83.28 = $0.54 (too much subtracted from checkbook) POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Understanding NOTES: 5 min.

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Chapter 7—Accounting for Cash 76. Post the differences between the cash count and the cash register tape to the Cash Short and Over T account. Assume a change fund of $100. Date March 3 4 5 6 7

Cash Register Tape $1,495.89 1,878.55 741.76 1,646.62 1,714.13

Cash Count $1,601.89 1,986.55 843.76 1,744.62 1,814.13

Cash Short and Over

What is the amount of cash sales for the week?

$__________

What is the balance in the cash short and over account?

$__________

Does the balance in the cash short and over account represent a shortage or overage?

$__________

How much cash was deposited?

$__________

ANSWER: Cash Short and Over 3/6 2.00 3/3 3/4 3/5

Bal.

6.00 8.00 2.00 16.00 14.00

1. $7,476.95 2. $14.00 credit 3. an overage 4. $7,490.95 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.29 - LO: 7-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Understanding NOTES: 10 min. Cengage Learning Testing, Powered by Cognero

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Chapter 7—Accounting for Cash 77. The person presenting the check for payment is called the ____________________. ANSWER: payee POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 78. ____________________ represent items that the bank deducts from the depositor's account. ANSWER: Debit memos POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 79. Checks deposited by the depositor that are not paid because the drawer did not have sufficient funds are called ____________________. ANSWER:

not sufficient fund checks NSF checks POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 80. Bringing the book and bank balances into agreement is called ____________________. ANSWER: bank reconciliation POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 81. A(n) ____________________ consists of a stamp or written signature and in some cases other important information on the back of the check. ANSWER: endorsement POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 82. (Appendix) The set of procedures designed to ensure proper accounting for transactions is known as ____________________. ANSWER: internal controls POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 83. ____________________ are provided by many banks to allow depositors to make deposits and withdrawals at all times by using a plastic card and a personal identification number. ANSWER:

Automated teller machines ATMs POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 84. The ____________________ is generally established to pay for small items with cash. ANSWER: petty cash fund POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 85. ____________________ are deposits that have not reached or been recorded by the bank before the bank statement is prepared. ANSWER: Deposits in transit POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 86. A(n) ____________________ contains a listing of all items being deposited. ANSWER: deposit ticket POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 87. A statement of account issued by a bank to each depositor once a month is known as a(n) ____________________. ANSWER: bank statement POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 88. A(n) ____________________ is a special multi-column record used to keep track of payments from the petty cash fund as a supplement to the accounting records. ANSWER: petty cash payments record POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 89. Each person authorized to sign checks must sign a(n) ____________________. ANSWER: signature card POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 90. ____________________ are checks that have been issued during the period, but have not been presented to the bank for payment before the bank statement is prepared. ANSWER: Outstanding checks POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 91. When words such as "for deposit only" or "pay to the order of" are added to a blank endorsement, it becomes a(n) ____________________. ANSWER: restrictive endorsement POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 92. Banks providing check printing and processing will typically assess fees known as ____________________. ANSWER: service charges POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 93. To a business, ____________________ includes currency, coins, checks received from customers, money orders, and bank cashier's checks. ANSWER: cash POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 94. The ____________________ is a supply of currency and coins kept in a cash drawer for use in handling cash transactions. ANSWER: change fund POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.29 - LO: 7-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 95. ____________________ are items that the bank adds to a depositor's account. ANSWER: Credit memos POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 96. The bank on which a check is drawn is known as the ____________________. ANSWER: drawee POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 97. The ____________________ is the small fraction printed in the upper right-hand corner of a check used to sort and route checks throughout the banking system. ANSWER:

American Bankers Assoc. Number ABA Number POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 7—Accounting for Cash 98. ____________________ are checks written by a depositor and paid by the bank. ANSWER: Canceled checks POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.27 - LO: 7-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 99. ____________________ use computers rather than paper checks to complete transactions with the bank. ANSWER:

Electronic funds transfers EFTs POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.28 - LO: 7-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. restrictive endorsement b. bank reconciliation c. bank statement d. blank endorsement e. canceled checks f. petty cash fund g. payee h. check i. check stub j. petty cash payments record k. NSF checks l. deposit ticket m. deposits in transit n. drawee o. drawer p. electronic funds transfer q. endorsement r. magnetic ink character recognition code Cengage Learning Testing, Powered by Cognero

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Chapter 7—Accounting for Cash

DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.27 - LO: 7-1 COLL.HEIN.17.28 - LO: 7-2 COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-11-Bank Reconciliation ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 100. A report used to bring the book and bank balances into agreement. ANSWER: b POINTS: 1 101. The depositor's checks paid by the bank during the bank statement period. ANSWER: e POINTS: 1 102. A process using a computer rather than paper checks to complete transactions with the bank. ANSWER: p POINTS: 1 103. A statement of account issued by a bank to each depositor once a month. ANSWER: c POINTS: 1 104. A form showing a detailed listing of items being deposited. ANSWER: l POINTS: 1 105. The bank on which the check is drawn. ANSWER: n POINTS: 1 106. A fund established to pay for small items with cash. ANSWER: f POINTS: 1 107. In some checkbooks, a document attached to a check that contains space for relevant information about the check. ANSWER: i POINTS: 1

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Chapter 7—Accounting for Cash 108. Deposits that have not reached or been recorded by the bank before the bank statement is prepared. ANSWER: m POINTS: 1 109. The person being paid the cash. ANSWER: g POINTS: 1 110. Stamping or writing the depositor's name and sometimes other information on the back of the check. ANSWER: q POINTS: 1 111. An endorsement where the depositor simply signs the back of the check, making the check payable to any bearer. ANSWER: d POINTS: 1 112. An endorsement where the depositor adds words such as "For deposit" to restrict the payment of the check. ANSWER: a POINTS: 1 113. The character code used to print identifying information on the lower left front side of each check. ANSWER: r POINTS: 1 114. Checks deposited by the depositor that are not paid because the drawer did not have sufficient funds. ANSWER: k POINTS: 1 Match the terms with the definitions. a. outstanding checks b. cash c. petty cash voucher d. automated teller machines e. change fund f. internal control g. credit memos h. debit memos DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.27 - LO: 7-1 COLL.HEIN.17.28 - LO: 7-2 COLL.HEIN.17.29 - LO: 7-4 COLL.HEIN.17.30 - LO: 7-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication Cengage Learning Testing, Powered by Cognero

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Chapter 7—Accounting for Cash TOPICS:

ACBSP: APC-11-Bank Reconciliation ACBSP: APC-10-Internal Control KEYWORDS: Bloom's: Remembering NOTES: 1 min. 115. Checks issued during the bank statement period that have not been presented to the bank for payment before the statement is prepared. ANSWER: a POINTS: 1 116. Items that the bank deducts from the account. ANSWER: h POINTS: 1 117. Machines used by depositors to make withdrawals or deposits at any time. ANSWER: d POINTS: 1 118. To a business, this includes currency, coins, checks received from customers, money orders, and bank cashier's checks. ANSWER: b POINTS: 1 119. A set of procedures designed to ensure proper accounting for transactions. (Appendix) ANSWER: f POINTS: 1 120. A receipt that is prepared for every payment from the petty cash fund. ANSWER: c POINTS: 1 121. A supply of currency and coins kept in a cash drawer for use in handling sales transactions. ANSWER: e POINTS: 1 122. Items that the bank adds to a customer's checking account. ANSWER: g POINTS: 1

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 1. Payroll expenditures represent a relatively small part of the total expenditures of most companies. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.31 - LO: 8-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. The Fair Labor Standards Act provides that all employees covered by the act must be paid one and one-half times the regular rate for all hours worked over 40 per week. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. The Fair Labor Standards Act requires employees to pay double the regular hourly rate for the time worked on Saturday. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 4. Compensation expressed in terms of hours, weeks, or units produced for skilled or unskilled labor is usually referred to as salary. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. Companies must accumulate payroll data both for the business as a whole and for each employee. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.31 - LO: 8-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. Compensation for managerial or administrative services usually is expressed in biweekly, monthly, or annual terms and is called wages. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 7. Every individual who performs services for a business is considered to be an employee. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.31 - LO: 8-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. The various government laws and regulations regarding employee deductions, employer payroll taxes, payroll records, and payroll reports apply only to employees and not to independent contractors. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.31 - LO: 8-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. Government laws and regulations regarding payroll are much more complex for employees than for independent contractors. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.31 - LO: 8-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 10. Employers primarily use the wage-bracket method to determine the amount of tax to be withheld from an employee's pay. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. The difference between an independent contractor and an employee is an important legal distinction. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.31 - LO: 8-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. An independent contractor performs a service for a fee and works under the control and direction of the company paying for the service. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.31 - LO: 8-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 13. The payroll register is a summary of the annual earnings of each employee. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.33 - LO: 8-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. Plastic cards or badges encoded with basic employee data are now being used in computer-based time keeping systems. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. The Medicare tax rate is subject to a maximum amount. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 16. FICA taxes include amounts for both Social Security but not Medicare programs. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. The payroll register replaces the general journal in most businesses. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.33 - LO: 8-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. The earnings base, against which the FICA tax is applied, and the tax rate have been changed several times since the law was first enacted and can be changed by Congress at any time in the future. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 19. Separate accounts are kept for each type of earnings deduction. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.34 - LO: 8-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. Under federal law, employers are required to withhold a percentage of the employees' wages for pensions. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. A purely manual system of record keeping is one in which all records, journals, and ledgers are prepared by hand. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.35 - LO: 8-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 22. A withholding allowance exempts a specific dollar amount of an employee's gross pay from federal income tax withholding. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. Pension payments are required deductions from an employee's gross earnings. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. Tracing the employee's gross pay for a specific time period into the appropriate wage-bracket table provided by the Internal Revenue Service is called using the wage-bracket method to determine the amount of tax to be withheld from an employee's pay. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 25. Both manual and electronic payroll systems require the same payroll input and output. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.35 - LO: 8-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Understanding NOTES: 1 min. 26. The employee's earnings record is a summary of the earnings of all employees for each pay period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.33 - LO: 8-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. An employee's total earnings is referred to as gross pay. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 28. Employees Income Tax Payable is a liability account that is credited for the FICA tax withheld from an employee's earnings. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.33 - LO: 8-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. The Federal Insurance Contributions Act requires employers to withhold FICA taxes from employees' earnings. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. Deductions for U.S. savings bond purchases, pension plan payments, and Social Security taxes are considered voluntary deductions. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 31. Base and rate changes in payroll taxes such as FICA affect the accounting principles and procedures for payroll. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. The journal entry to record payroll transactions for the accounting period is to debit Wages and Salaries Expense for the gross pay and credit the appropriate liability and cash accounts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.34 - LO: 8-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. Under federal law, employers are required to withhold certain amounts from the total earnings of each employee to be applied toward the payment of the employee's federal income tax. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 34. The Social Security Tax Payable account is debited for Social Security taxes withheld and Social Security taxes imposed on the employer. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.34 - LO: 8-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. Employers may use the wage-bracket method to determine the amount of tax to be withheld from an employee's pay. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. Unless an employer has only a few employees, manual systems can be inefficient. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.35 - LO: 8-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 37. Whether the wage-bracket method or some other method is used in computing the amount of tax to be withheld, the sum of the taxes withheld from an employee's wages is only an approximation of what the employee's actual taxes will be for the year. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. An electronic payroll system is one in which data is processed using computers equipped with payroll software. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.35 - LO: 8-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 39. In an electronic system, only the employee number and hours worked need to be entered into a computer each pay period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.35 - LO: 8-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 40. Joel Trump is paid one and one-half times the regular hourly rate for all hours worked in excess of 40 hours per week and double time for work on Sunday. Trump's regular rate is $8 per hour. During the week ended October 10, he worked 9 hours each day from Monday through Friday, 6 hours on Saturday, and 4 hours on Sunday. Trump's total earnings for the week ended October 10 are a. $110. b. $320. c. $430. d. $516. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 2 min. 41. Sandra Wilson is paid one and one-half times the regular hourly rate for all hours worked in excess of 40 hours per week and double time for work on Sunday. Wilson's regular rate is $12 per hour. During the week ended July 3, she worked 9 hours each day from Monday through Friday, 6 hours on Saturday, and 4 hours on Sunday. Wilson's overtime earnings for the week ended July 3 are a. $180. b. $294. c. $360. d. $430. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 2 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 42. Cameron Tiller is paid one and one-half times the regular hourly rate for all hours worked in excess of 40 hours per week and double time for work on Sunday. Tiller's regular rate is $12 per hour. During the week ended March 15, he worked 9 hours each day from Monday through Friday, 6 hours on Saturday, and 4 hours on Sunday. Tiller's total regular earnings for the week ended March 15 are a. $110. b. $216. c. $480. d. $430. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 2 min. 43. Jillian Diaz receives a regular salary of $1,500 a month and is entitled to overtime pay at the rate of one and onehalf times the regular hourly rate for any time worked in excess of 40 hours per week. Diaz's overtime pay rate is a. $6.92. b. $12.98. c. $276.92. d. $1,800. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 2 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 44. Any person who agrees to perform a service for a fee and is not subject to the control of those for whom the service is performed is called a(n) a. manager. b. employee. c. independent contractor. d. executive. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.31 - LO: 8-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 45. The Fair Labor Standards Act provides which of the following minimum rates to be paid to employees for all hours worked over 40 hours per week? a. one and one-half times the regular rate b. same rate as the regular rate c. two and one-half times the regular rate d. two times the regular rate ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 46. Compensation normally expressed in biweekly, monthly, or annual terms for managerial or administrative services is called a. supplements. b. commission. c. salary. d. wages. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 47. Examples of employees include all of the following EXCEPT a. secretaries. b. attorneys. c. accounting clerks. d. plant supervisors. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.31 - LO: 8-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 48. An amount of an employee's gross pay which is exempt from federal income tax withholding is a(n) a. additional withholding allowance. b. withholding allowance. c. zero bracket amount. d. special withholding allowance. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 49. Employers usually prepare which of the following types of payroll records? a. payroll register, employee earnings record, and payroll check b. payroll register, payroll ledger, and employee earnings record c. payroll journal, employee earning record, and payroll ledger d. employee earning record, payroll check, and payroll ledger ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.33 - LO: 8-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 50. Federal income tax that is withheld each pay period from the employee's earnings is NOT based on the a. total earnings of the employee. b. marital status of the employee. c. number of withholding allowances claimed by the employee. d. number of sick days. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 51. The needs of management and the requirements of various federal and state laws make it necessary for employers to keep records that will provide all of the following information for each employee EXCEPT a. name, address, and Social Security number. b. gross amount of earnings, date of payment, and period of employment covered by each payroll. c. gross amount of earnings accumulated since the first of the year. d. number of hours the employee works as a volunteer for the community. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.33 - LO: 8-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 52. Each employee is required to furnish the employer with which of the following forms? a. W-2 b. 941 c. W-4 d. 1040 ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 53. For this text, it is assumed that the maximum amount of earnings subject to FICA taxes is a. $100,000. b. $110,500. c. $105,900. d. $110,100 ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 54. Form W-4 is a(n) a. Social Security application form. b. Employer's Quarterly Federal Tax Return. c. Employee's Withholding Allowance Certificate. d. Wage and Tax Statement. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 55. Denise Cruz receives a regular salary of $900 a month and is entitled to overtime pay at the rate of one and onehalf times the regular hourly rate for any time worked in excess of 40 hours per week. Cruz's overtime rate of pay is a. $5.63. b. $7.79. c. $8.44. d. $22.50. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 56. The act that requires most employers to withhold certain amounts from employees' earnings for contributions to the Social Security and Medicare programs is called the a. Federal Unemployment Tax Act. b. Federal Withholding Tax Act. c. State Unemployment Tax Act. d. Federal Insurance Contributions Act. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 57. The account that should be credited for the total income tax withheld from employee's earnings is a. FICA Tax Payable. b. FICA Tax Expense. c. Employee Income Tax Payable. d. Employee Income Tax Expense. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.34 - LO: 8-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 58. The payroll register for the week ended February 14 for Luxury Homes Construction Company indicates gross earnings of $4,000 and total deductions of $1,200. The entry for the Wages and Salaries Expense ending February 14 would be a a. $1,200 debit. b. $2,800 credit. c. $4,000 debit. d. $5,200 debit. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.34 - LO: 8-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 59. The account that is credited with amounts withheld from an employee's earnings for any pension plan contribution is a. Pension Plan Expense. b. Pension Plan Taxes Payable. c. Miscellaneous Expense. d. Pension Plan Deductions Payable. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.34 - LO: 8-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 60. The payroll register for the week ended April 15 for Ultimate Tanning Spa indicates gross earnings of $4,000 and total deductions of $1,200. The journal entry for the payroll for this week would include which of the following credit amounts to Cash? a. $1,200 b. $2,800 c. $4,000 d. $5,200 ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.34 - LO: 8-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 61. The account that is credited for the Medicare tax withheld from employee's earnings and the Medicare tax imposed on the employer is a. Medicare Tax Expense. b. Medicare Tax Payable. c. Payroll Taxes Expense. d. Payroll Expense. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.34 - LO: 8-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 62. When a single-check for payroll is prepared and deposited into a special payroll bank account, which of the following entries is made to record the deposit? a. debit Wages and Salaries Expense; credit Cash b. debit Payroll Cash; credit Cash c. debit Cash; credit Payroll Expense d. debit Cash; credit Wages and Salaries Expense ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.34 - LO: 8-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 63. A multi-column form used to assemble, compute, and summarize data for all employees at the end of the payroll period is a(n) a. payroll register. b. employee earnings record. c. payroll ledger. d. payroll check. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.33 - LO: 8-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 64. The account that is debited for the total amount of the gross earnings of all employees for each pay period is a. Wages and Salaries Expense. b. Payroll Taxes Expense. c. Miscellaneous Expense. d. Withdrawal Expense. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.34 - LO: 8-4 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 65. A separate record of each employee's earnings is called a(n) a. payroll register. b. employee earning record. c. payroll ledger. d. payroll check. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.33 - LO: 8-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 66. The outputs from a manual or an electronic payroll accounting system include all of the following EXCEPT a. payroll checks. b. a payroll register. c. an employee earnings record. d. time cards. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.35 - LO: 8-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 67. The payroll register for the week ended May 28 for J & D United indicates gross earnings of $4,000 and total deductions of $1,200. The total of all the credit entries for the payroll for the week ending May 28 would be a. $1,200. b. $2,800. c. $4,000. d. $5,200. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.34 - LO: 8-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 68. According to the assumption used in this text, employers are required to withhold Social Security taxes on the first ____ of each employee's earnings. a. $120,000 b. $105,900 c. $120,000 d. $110,100 ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 69. F. Fuentes operates a business known as Variety Unlimited. Listed below are the name, number of allowances claimed, marital status, total hours worked, and hourly rate of each employee. All hours worked in excess of 40 hours per week are paid at the rate of time and a half. The employer uses the weekly federal income tax withholding table. Social Security tax is withheld at the rate of 6.2%, Medicare tax is withheld at the rate of 1.45%. All employees have Health Insurance Premiums withheld in the amount of $55.00. Hertz, Jordan, and Pollo each will have $25.00 withheld this payday under a savings bond purchase plan. Fuentes follows the practice of drawing a single check for the net amount of the payroll and depositing the check in a special payroll account at the bank. Individual paychecks are then drawn for the amount due each employee. The checks issued this payday were numbered consecutively beginning with No. 786. Variety Unlimited Payroll information for the week ended December 15, 20-Total Regular Cumulative # of Marital Hours Hourly Earnings Name Allowances Status Worked Rate thru Dec. 8 H. Hertz 5 M 40 $34.00 $86,240 C. Lobel 2 M 43 14.00 27,440 J. Jordan 3 M 47 11.00 21,560 D. Pollo 2 S 39 8.00 15,680 M. Perez 6 S 45 14.00 31,360 Required: 1. Prepare a payroll register for Variety Unlimited for the pay period ended December 15, 20--. 2. Assuming that the wages for the week ended December 15 were paid on December 17, enter the payment in the general journal. Cengage Learning Testing, Powered by Cognero

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions (left side)

PAYROLL REGISTER Earnings

Name

# of Allowances M/S

Regular

Taxable Earnings

Overtime Total

(right side)

Cumulative Unemploy. Social Earnings Comp. Security

PAYROLL REGISTER Deductions

Federal Income Tax

Social Health Savings Security Medicare Tax Insurance Bonds Tax

Total

Net Pay

GENERAL JOURNAL Date

Check No.

Page 3

Description

Post Ref.

Debit

Credit

ANSWER: (left side)

PAYROLL REGISTER Earnings

Name H. Hertz Cengage Learning Testing, Powered by Cognero

# of Allowances M/S

Regular

1,360.00

Overtime

Total

Cumulative Earnings

1,360.00

87,600.00 Page 29

Chapter 8—Payroll Accounting: Employee Earnings and Deductions C. Lobel J. Jordan D. Pollo M. Perez

2 3 2 6

M M S S

560.00 440.00 312.00 560.00 3,232.00

63.00 115.50

623.00 28,063.00 555.50 22,115.50 312.00 15,992.00 665.00 32,025.00 3,515.50 185,795.50

105.00 283.50

Taxable Earnings

Name

< < < < <

H. Hertz C. Lobel J. Jordan D. Pollo M. Perez

Unemploy. Comp.

Social Security

1,360.00 623.00 555.50 312.00 665.00 3,515.50

(right side)

PAYROLL REGISTER Deductions

Federal Income Tax

Social Security Tax

Medicare Tax

Health Insurance

Savings Bonds

110.00 32.00 18.00 13.00 19.00 192.00

84.32 38.63 34.44 19.34 41.23 217.96

19.72 9.03 8.05 4.52 9.64 50.96

55.00 55.00 55.00 55.00 55.00 275.00

25.00 25.00 25.00 _____ 75.00

Total

Net Pay

Check No.

294.04 134.66 140.49 116.86 124.87 810.92

1065.96 488.34 415.01 195.14 540.13 2,704.58

786 787 788 789 790

GENERAL JOURNAL Date Dec.

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Description Wages and Salaries 17 Expense Employee Income Tax Payable Social Security Tax Payable Medicare Tax Payable Health Insurance Premiums Payable

Page 3 Post Ref.

Debit

Credit

3,515.50 192.00 217.96 50.96 275.00 Page 30

Chapter 8—Payroll Accounting: Employee Earnings and Deductions Savings Bonds Plan Payable Cash

75.00 2,704.58

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Moderate COLL.HEIN.17.33 - LO: 8-3 COLL.HEIN.17.34 - LO: 8-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Understanding NOTES: 15 min. 70. Ian McCarthy works for Willow Tree Homes. His rate of pay is $16.00 per hour and he is paid 1 1/2 times the regular rate for all hours worked in excess of 40 per week. During the last week of March of the current year he worked 45 hours. Ian is single and claims 2 withholding allowances on his W-4 form. His weekly wages are subject to the following deductions: a. b. c. d. e. f.

Employee (Federal) income tax (use withholding table provided in text). Social Security tax at 6.2%. Medicare tax at 1.45%. Health insurance premium, $60. Credit union deposit, $140. United Way contribution, $15.

Required: 1. Compute McCarthy's regular, overtime, gross, and net pay. 2. Journalize the payment of his wages for the week ended March 26, crediting Cash for the net amount. ANSWER: 40 × $16.00 5 × $24.00

=$640.00 regular Deductions: = 120.00 overtime Employee (Federal) income tax gross $760.00 Social Security tax pay Medicare tax Health insurance Credit union deposit United Way contribution $760.00 - $356.14 = $403.86 Total deductions (NetPay)

GENERAL JOURNAL Date Mar. Cengage Learning Testing, Powered by Cognero

Description Wages and Salaries Expense Employee Income Tax Payable

$ 83.00 47.12 11.02 60.00 140.00 15.00 $356.14

Page 3 Post Ref.

Debit 760.00

Credit 83.00 Page 31

Chapter 8—Payroll Accounting: Employee Earnings and Deductions Social Security Tax Payable Medicare Tax Payable Health Insurance Premiums Payable Credit Union Payable United Way Contributions Payable Cash

47.12 11.02 60.00 140.00 15.00 403.86

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Moderate COLL.HEIN.17.33 - LO: 8-3 COLL.HEIN.17.34 - LO: 8-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Understanding NOTES: 4 min. 71. Jerri's Mason Supply Company has four employees who are paid on a weekly basis receiving time and a half for working more than 40 hours in any one week. The payroll data for the week ended December 10 is as follows: # of Marital Allowances Status

Name B. Russo P. Higgins S. Minsky A. Mendez

0 1 2 4

S M M M

Total Hours

Rate

Cumulative Earnings

44 46 40 40

$ 8.00 28.00 9.00 34.00

$ 8,300 52,176 18,560 86,000

Federal Income Tax $ 40 160 8 129

Social Security tax is withheld at 6.2% and Medicare tax at 1.45%. Each employee that is single has $40 withheld for health insurance and each that is married has $70 withheld. Higgins has $25 withheld for United Way. Number the checks beginning with 803. Required: 1. Complete the payroll register. 2. Journalize the payroll entry. (left side)

PAYROLL REGISTER Earnings

Name

# of Allowances M/S

Regular

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Overtime Total

Taxable Earnings Cumulative Unemploy. Social Earnings Comp. Security

Page 32

Chapter 8—Payroll Accounting: Employee Earnings and Deductions

(right side)

PAYROLL REGISTER Deductions

Federal Income Tax

Social Security Tax

Medicare Tax

Health Insurance

Savings Bonds

GENERAL JOURNAL

Total

Net Pay

Check No.

Credit

Date

Description

Page 3 Post Ref. Debit

ANSWER:

(left side)

PAYROLL REGISTER

Earnings Name B. Russo P. Higgins S. Minsky A. Mendez

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# of Allowances M/S Regular Overtime

Total

Cumulative Earnings

320.00

48.00

368.00

8,668.00

1,120.00

252.00 1,372.00

53,548.00

360.00

18,920.00

1,360.00

_____ 1,360.00

87,360.00

3,160.00

300.00 3,460.00

168,496.00

Taxable Earnings Unemploy. Social Page 33

Chapter 8—Payroll Accounting: Employee Earnings and Deductions < < < < <

Name B. Russo P. Higgins S. Minsky A. Mendez

Comp.

Security 368.00 1,372.00 360.00 1,360.00 3,460.00

(right side)

PAYROLL REGISTER Deductions

Federal Income Tax

Social Security Tax

Medicare Tax

Health Insurance

40.00 155.00 6.00 121.00 322.00

22.82 85.06 22.32 84.32 214.52

5.34 19.89 5.22 19.72 50.17

40.00 70.00 70.00 70.00 250.00

Savings Bonds

25.00 _____ 25.00

Total

Net Pay

Check No.

108.16 354.95 103.54 295.04 861.69

259.84 1,017.05 256.46 1,064.96 2,598.31

803 804 805 806

GENERAL JOURNAL Date Description Dec. 10 Wages and Salaries Expense Employee Income Tax Payable Social Security Tax Payable Medicare Tax Payable Health Insurance Premiums Payable United Way Contributions Payable Cash

Page 3 Post Ref.

Debit 3,460.00

Credit 322.00 214.52 50.17 250.00 25.00 2,598.3

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Challenging COLL.HEIN.17.33 - LO: 8-3 COLL.HEIN.17.34 - LO: 8-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Understanding NOTES: 20 min. 72. Vince Lupino works for Best Supplies Company, which pays its employees time and a half for all hours worked in excess of 40 hours per week. Lupino's rate of pay is $12.00 per hour paid weekly. Federal income tax withheld was $54.00. His wages are subject to Social Security tax withheld at the rate of 6.2% and Medicare tax at the rate of 1.45%. He worked 8 hours of overtime last week (week ended July 16). Required: 1. Compute the following: Cengage Learning Testing, Powered by Cognero

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions

a. Regular pay for the week b. Overtime pay for the week c. Total gross wages d. Social Security withheld e. Medicare tax withheld f. Total withholding g. Net pay Journalize the payroll entry.

ANSWER:

a. b. c. d. e. f. g.

$480.00 $144.00 $624.00 $38.69 $9.05 $101.74 $522.26

2. GENERAL JOURNAL Date July

Description Wages and 16 Salaries Expense Employee Income Tax Payable Social Security Tax Payable Medicare Tax Payable Cash

Page 1 Post Ref.

Debit

Credit

624.00

54.00

38.69 9.05 522.26

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Understanding NOTES: 5 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 73. Journalize the entry for Hot Rod Service using the following data from the payroll register: Regular earnings Overtime earnings Federal income tax withheld Social Security tax withheld Medicare tax withheld Pension contribution from employees Health insurance premiums

$16,370 903 2,268 827 194 711 807

ANSWER:

Date

GENERAL JOURNAL Post Description Ref. Wages and Salaries Expense Employee Income Tax Payable Social Security Tax Payable Medicare Tax Payable Pension Plan Deductions Payable Health Insurance Premiums Payable Cash

Page 1 Debit 17,273.00

Credit 2,268.00 827.00 194.00 711.00 807.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.34 - LO: 8-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Understanding NOTES: 3 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 74. GENERAL JOURNAL Date

Description

Page 3 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Date Description Dec. 4 Wages and Salaries Expense Employee Income Tax Payable Social Security Tax Payable Medicare Tax Payable Health Insurance Premiums Payable United Way Contributions Payable Cash

Page 3 Post Ref.

Debit 2,672.00

Credit 241.00 165.66 38.75 125.00 25.00 2,076.59

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 75. Compensation for managerial or administrative services is called ____________________. ANSWER: salary POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 76. ____________________ are compensation for skilled or unskilled labor. ANSWER: Wages POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 77. An employee's total earnings are also known as ____________________. ANSWER: gross pay POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 78. Gross pay less mandatory and voluntary deductions is called ____________________. ANSWER: net pay POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 79. Someone who performs a service for a fee and does not work under the control and direction of the company paying for the service is known as a(n) ____________________. ANSWER: independent contractor POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.31 - LO: 8-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 80. A(n) ____________________ is a computerized system based on a software package that performs all payroll record keeping and prepares payroll checks. ANSWER: electronic system POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.35 - LO: 8-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 81. The ____________________ requires employers to pay overtime at 1 1/2 times the regular rate to any hourly employee who works over 40 hours in a week. ANSWER: Fair Labor Standards Act POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 82. A(n) ____________________ exempts a specific dollar amount of an employee's gross pay from federal income tax withholding. ANSWER: withholding allowance POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 83. ____________________ provides pensions and disability benefits. ANSWER: Social Security POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 84. The account, ____________________, should be credited for the total income tax withheld from an employee's earnings. ANSWER: Employee Income Tax Payable POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.34 - LO: 8-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 85. The ____________________ requires employers to determine the amount to withhold from an employee's gross pay for a specific time period from the appropriate wage-bracket table provided by the Internal Revenue Service. ANSWER: wage-bracket method POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 86. The ____________________ account is credited for the Social Security tax withheld from an employee's earnings. ANSWER: Social Security Tax Payable POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 87. A separate record of each employee's earnings is known as a(n) ____________________. ANSWER: employee earnings record POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.33 - LO: 8-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 88. Payroll taxes withheld to provide Social Security and Medicare benefits are called ____________________. ANSWER: FICA taxes POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.32 - LO: 8-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 89. The form used to assemble the data required at the end of each payroll period is the ____________________. ANSWER: payroll register POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.33 - LO: 8-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 90. With ____________________, the employee does not handle the paycheck; payment is made by the employer directly to the employee's bank. ANSWER: direct deposit POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.33 - LO: 8-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. direct deposit b. electronic system c. employee d. employee earnings record e. Fair Labor Standards Act (FLSA) f. FICA taxes g. gross pay h. independent contractor i. manual system j. net pay k. payroll processing center l. payroll register m. salary n. wage-bracket method o. wages p. withholding allowance DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.31 - LO: 8-1 COLL.HEIN.17.32 - LO: 8-2 COLL.HEIN.17.33 - LO: 8-3 COLL.HEIN.17.35 - LO: 8-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 91. A form used to assemble the data required at the end of each payroll period. ANSWER: l POINTS: 1 92. Compensation for skilled or unskilled labor. ANSWER: o POINTS: 1 93. An employee's total earnings ANSWER: g POINTS: 1 94. Requires employers to pay overtime at 1 1/2 times the regular rate to any hourly employee who works over 40 hours in a week. ANSWER: e POINTS: 1 95. The employee does not handle the paycheck; payment is made by the employer directly to the employee's bank. ANSWER: a POINTS: 1 96. Compensation for managerial or administrative services. ANSWER: m POINTS: 1 97. Exempts a specific dollar amount of an employee's gross pay from federal income tax withholding. ANSWER: p POINTS: 1 98. Payroll taxes withheld to provide Social Security and Medicare benefits. ANSWER: f POINTS: 1 99. Someone who works under the control and direction of an employer. ANSWER: c POINTS: 1 100. Employers determine the amount to withhold from an employee's gross pay for a specific time period from the appropriate wage-bracket table provided by the Internal Revenue Service. ANSWER: n POINTS: 1 101. Gross pay less mandatory and voluntary deductions. ANSWER: j POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Chapter 8—Payroll Accounting: Employee Earnings and Deductions 102. Someone who performs a service for a fee and does not work under the control and direction of the company paying for the service. ANSWER: h POINTS: 1 103. A business that sells payroll record-keeping services. ANSWER: k POINTS: 1 104. Payroll system in which all records are prepared by hand. ANSWER: i POINTS: 1 105. A separate record of each employee's earnings. ANSWER: d POINTS: 1 106. A computer system based on a software package that performs all payroll record keeping and prepares payroll checks. ANSWER: b POINTS: 1

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 1. The FUTA tax applies to all employee earnings throughout the year. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. One-half of the self-employment tax is really a personal expense to the owner of the business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. Self-employment tax is double the Social Security and Medicare rates. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 4. Persons earning self-employment income of $400 or more must pay a self-employment tax. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. Self-employed individuals can be viewed as both employer and employee. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. The employer must pay the amount owed for Social Security and Medicare by the business to the IRS; however, the employees pay for Social Security and Medicare directly to the IRS. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 7. The employer FICA tax is levied on employers at the same rate and on the same earnings bases as the employee FICA tax. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. Employers' payroll taxes include FICA, FUTA, and SUTA taxes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. Self-employment tax is a contribution to the unemployment compensation program. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 10. Self-employment income is the gross income of a trade or business run by an individual. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. The amount of employers' Medicare taxes is computed by multiplying total earnings by 1.45%. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.37 - LO: 9-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. The payroll register is a key source of information for computing employer payroll taxes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 13. Most employers have to pay FICA and FUTA taxes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. Form 940 is called the Employer's Quarterly Federal Tax Return. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. The cost of workers' compensation insurance to a construction company with 15 employees would likely be higher than the cost of insurance to a small candy company with 15 employees. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.39 - LO: 9-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 16. Employers are allowed a credit against the FUTA tax for participation in state unemployment programs. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. In general, the larger the amount of Social Security and Medicare taxes due from an employer, the more frequently payments must be made. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. The date by which federal income tax withholding, Social Security, and Medicare taxes must be paid depends on the amount of these taxes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 19. If an employer wishes, the FUTA tax may be deducted from employees' earnings. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. The due date for payroll taxes is the last day of each fiscal quarter: March 31, June 30, September 30, and December 31. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. The due date for payroll taxes is not the same date for all employers. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 22. In most states, the state unemployment tax is levied only on employers. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. In most states, if an employer has very few former employees who collect unemployment compensation, the employer qualifies for a lower state unemployment tax rate. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. The EFTPS is an electronic funds transfer system for making federal tax deposits. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 25. Employer payroll taxes clearly are an insignificant cost of doing business. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. The Social Security, Medicare, FUTA, and SUTA tax accounts normally have credit balances. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.37 - LO: 9-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. If an employer qualifies for a lower state unemployment tax rate, this lowers the credit allowed in computing the federal unemployment tax due. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 28. Journalizing payroll taxes for the employer will require several debit entries but only one credit entry. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.37 - LO: 9-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. The Social Security, Medicare, and FUTA tax accounts are debited when the taxes are actually paid to the IRS. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.37 - LO: 9-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. Social Security, Medicare, FUTA, and SUTA taxes have separate liability accounts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.37 - LO: 9-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 31. Workers' compensation provides insurance for employees who suffer a job-related illness or injury. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.39 - LO: 9-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. Employees usually pay the entire cost of workers' compensation insurance. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.39 - LO: 9-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. Any Federal Reserve Bank or other authorized commercial bank may issue an Employer Identification Number (EIN). a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 34. By January 31 each year, employers must furnish each employee with a Wage and Tax Statement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. SUTA tax payments vary among states but are usually required on a quarterly basis. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. FUTA taxes are deposited and an annual report of federal unemployment tax is filed using Form 8109. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 37. Since there is no maximum earnings on the Medicare component of the Social Security tax, the Medicare tax rate of 1.45% is applied to total earnings. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. Form 941, Employer's Quarterly Federal Tax Return, must be filed with the IRS at the end of the month following each calendar quarter. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 39. Each employer must have an Employer Identification Number (EIN) to show on all tax reports. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 40. Which of the following is a payroll tax normally paid by both the employee and the employer? a. Medicare tax b. FUTA tax c. property tax d. SUTA tax ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 41. The self-employment tax rate is double the rate of a. Social Security and Medicare taxes. b. FUTA taxes. c. SUTA taxes. d. property taxes. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 42. A key source of information for computing employer payroll taxes is the a. statement of owner's equity. b. end-of-period balance sheet. c. payroll register. d. employees' check stubs. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 43. The employer pays which of the following to the Internal Revenue Service? a. the employer's Social Security and Medicare taxes b. sales taxes c. property taxes d. no taxes ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 44. The federal unemployment tax is levied on a. employers and is not deducted from employees' earnings. b. employees and is deducted from customer payments. c. employers and is deducted from employees' earnings. d. employees and employers. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 45. A self-employment tax is required of an individual who owns his or her own business and makes a. $1 or more. b. $200 or more. c. $400 or more. d. $1,000 or more. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 46. A self-employment tax is a contribution to the a. charities of the individual owner's choice. b. SUTA programs. c. FUTA programs. d. Social Security and Medicare programs. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 47. Which of the following tax programs often has a merit-rating system to encourage employers to provide regular employment for workers? a. FICA b. FUTA c. SUTA d. workers' compensation insurance ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 48. To journalize the employer's payroll taxes, we need to credit all of the following accounts EXCEPT a. Payroll Taxes Expense. b. Social Security Tax Payable. c. Medicare Tax Payable. d. FUTA Tax Payable. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.37 - LO: 9-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 49. Melissa Taylor has gross earnings of $425 and withholdings of $26.35 for Social Security tax, $6.16 for Medicare tax, and $35 for federal income tax. Her employer pays $26.35 for Social Security tax, $6.16 for Medicare tax, $3 for FUTA tax, and $9 for SUTA tax. The total cost of Melissa to her employer is a. $32.51. b. $425.00. c. $469.51. d. $437.00. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 50. When all taxes have been paid, the Social Security Tax Payable account will have a. a debit balance. b. a credit balance. c. a zero balance. d. equal debit and credit balances. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.37 - LO: 9-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 51. Employers who have $100,000 or more due in federal income tax withholding and Social Security and Medicare taxes on any day during the current quarter should journalize the debt and pay at the end of the a. year. b. quarter. c. month following the end of the quarter. d. next banking day. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 52. Employers who have less than $2,500 due in federal income tax withholding and Social Security and Medicare taxes at the end of the quarter should journalize the debt and pay at the end of the a. year. b. quarter. c. month following the end of the quarter. d. next banking day. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 53. An Employer Identification Number (EIN) is obtained by the employer from the a. nearest Federal Reserve Bank. b. CIA. c. Internal Revenue Service. d. nearest local federally insured bank. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 54. The rules by which employers must deposit Social Security and Medicare taxes can be found in the a. Circular E--Employer's Tax Guide. b. Circle K Tax Guide. c. Federal Reserve Bank Tax Guide. d. state tax guide. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 55. The date on which an employer must pay Social Security and Medicare taxes is a. January 1 of each year. b. December 31 of each year. c. June 30 of each year. d. dependent on the amount of the taxes. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 56. Form 941 is a(n) a. Employee Withholding Allowance Certificate. b. Employer's Quarterly Federal Tax Return. c. Wage and Tax Statement. d. Employer's Annual Federal Unemployment Tax Return. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 57. The total payroll cost to an employer of an employee who has gross earnings of $78,000 is a. $78,000 plus 30 percent. b. less than $78,000. c. exactly $78,000. d. more than $78,000. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 58. To journalize the payment of Medicare taxes to the IRS, the correct entry would be a. debit Medicare Tax Payable and credit IRS. b. debit Medicare Tax Payable and credit Social Security Payable. c. debit Medicare Tax Payable and credit Cash. d. debit Medicare Tax Payable and credit Payroll Taxes Expense. ANSWER: POINTS: DIFFICULTY: LEARNING OBJECTIVES:

c 1 Easy COLL.HEIN.17.37 - LO: 9-2 COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 59. After estimating its payroll for the year, an employer usually pays workers' compensation insurance a. at the beginning of the year. b. monthly. c. quarterly. d. at the end of the year. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.39 - LO: 9-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 60. The employer usually pays the entire cost of a. FICA. b. Workers' Compensation Insurance. c. Medical Insurance. d. Disability Insurance. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.39 - LO: 9-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 61. The adjustment to journalize an additional premium due at the end of the year for workers' compensation insurance (WCI) is a. debit WCI Expense and credit Cash. b. debit WCI Expense and credit Insurance Refund. c. debit WCI Expense and credit WCI Payable. d. debit Insurance Payable and credit WCI Payable. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.39 - LO: 9-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 62. The cost of workers' compensation insurance for the employer depends on all of the following EXCEPT a. the number of employees. b. the riskiness of the jobs the employees perform. c. the company's accident history. d. the amount of FICA, FUTA, and SUTA taxes due. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.39 - LO: 9-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 63. The payroll register for Automotive Service Center for the pay period ended June 30, 20--, showed the following: Total Earnings Taxable Earnings: FUTA SUTA Social Security Deductions: Federal income tax Social Security tax Medicare tax Pension plan Health insurance United Way

$623,000.00 4,500.00 4,500.00 574,000.00 91,800.00 35,588.00 9,033.50 4,800.00 16,200.00 12,000.00

The Social Security tax rate is 6.2%, Medicare tax is 1.45%, FUTA tax is 0.8%, and SUTA tax is 5.4%. Required: 1. Prepare a journal entry to record the payroll on June 30, 20--. 2. Prepare a journal entry to record the employer's payroll taxes. ANSWER:

1. GENERAL JOURNAL Date Description June 30 Wages and Salaries Expense Employee Income Tax Payable Social Security Tax Payable Medicare Tax Payable Pension Plan Deductions Payable Health Insurance Premiums Payable

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Page 1 Post Ref.

Debit 623,000.00

Credit 91,800.00 35,588.00 9,033.50 4,800.00 16,200.00 Page 25

Chapter 9—Payroll Accounting: Employer Taxes and Reports United Way Contributions Payable Cash

12,000.00 453,578.50

2. GENERAL JOURNAL Post Date Description Ref. June 30 Payroll Taxes Expense Social Security Tax Payable Medicare Tax Payable FUTA Tax Payable SUTA Tax Payable

Page 1 Debit 44,900.50

Credit 35,588.00 9,033.50 36.00 243.00

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Easy COLL.HEIN.17.36 - LO: 9-1 COLL.HEIN.17.37 - LO: 9-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 5 min. 64. Selected information from the payroll register of Barbara's Stables for the week ended September 28, 20--, is as follows: Social Security tax is 6.2% on the first $110,100 of earnings for each employee. Medicare tax is 1.45% of gross earnings, FUTA tax is 0.8%, and SUTA tax is 5.4% each on the first $7,000 of earnings.

Employee Name Carlosi, Peggy Sanchez, Carmela Delaney, Roger Weitz, Alana Dunhill, Craig Bella, Stephen

Cumulative Pay Before Current Earnings $ 84,240 81,900 109,800 6,300 6,800 42,330

Current Gross Pay $2,350 2,100 3,320 1,100 1,000 1,850

Taxable Earnings Unemployment Social Compensation Security

Calculate the amount of taxable earnings for unemployment and Social Security taxes, and prepare the journal entry to record the employer's payroll taxes as of September 28, 20--. ANSWER:

Employee Name Carlosi, Peggy Sanchez, Carmela Delaney, Roger Weitz, Alana Dunhill, Craig Cengage Learning Testing, Powered by Cognero

Cumulative Pay Before Current Earnings $ 84,240 81,900 109,800 6,300 6,800

Current Taxable Earnings Gross Unemployment Social Pay Compensation Security $ 2,350 $2,350 2,100 2,100 3,320 300 1,100 $700 1,100 1,000 200 1,000 Page 26

Chapter 9—Payroll Accounting: Employer Taxes and Reports Bella, Stephen

42,330 $331,370

1,850 $11,720

____ $900

GENERAL JOURNAL Post Date Description Ref. Sept. 28 Payroll Taxes Expense Social Security Tax Payable (8,700 × .062) Medicare Tax Payable (11,720 × .0145) FUTA Tax Payable (900 × .008) SUTA Tax Payable (900 × .054)

1,850 $8,700

Page 1 Debit Credit 765.14 539.40 169.94 7.20 48.60

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Moderate COLL.HEIN.17.36 - LO: 9-1 COLL.HEIN.17.37 - LO: 9-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 5 min. 65. R. L. Ybarra employs John Ince at a salary of $53,000 a year. Ybarra is subject to employer Social Security taxes at a rate of 6.2% and Medicare taxes at a rate of 1.45% on John's salary. In addition, Ybarra must pay SUTA tax at a rate of 5.4% and FUTA tax at a rate of 0.8% on the first $7,000 of Ince's salary. Compute the total cost to Ybarra of employing Ince for the year. Salary Social Security ($53,000 × .062) Medicare ($53,000 × .0145) SUTA ($7,000 × .054) FUTA ($7,000 × .008) Total cost POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 COLL.HEIN.17.37 - LO: 9-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 3 min. ANSWER:

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$53,000.00 3,286.00 768.50 378.00 56.00 $57,488.50

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 66. Ryan's Sparkling Jewels estimated its payroll for the coming year to be $84,000. Its workers' compensation insurance premium rate of 0.6% is paid at the beginning of each quarter. Required: 1. Calculate the estimated cost of workers' compensation insurance for the year. 2. Show the journal entry for the first quarterly payment on January 2, 20--. 3. Assume Ryan's actual payroll for the year was $89,000. Calculate the additional premium owed for 20--. Record the adjustment needed on December 31, 20--. The actual payment of the additional insurance premium will not take place until January of the following year. ANSWER:

$84,000 × .006 = $504 $504 ÷ 4 = $126 per quarter

2. GENERAL JOURNAL Post Date Description Ref. Workers' Compensation Insurance Jan. 2 Expense Cash 3.

Page 1 Debit Credit 126.00 126.00

$89,000 × .006 = $534 $534 − $504 = $30 additional premium due

GENERAL JOURNAL Post Date Description Ref. Workers' Compensation Insurance Dec. 31 Expense Workers' Compensation Insurance Payable

Page 1 Debit Credit 30.00 30.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.39 - LO: 9-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 3 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 67. Mark Turney owns Creative Corners. He does his banking at United Federal Bank (UFB) in Tucson, Arizona. The amounts in his general ledger for payroll taxes and the employee's withholding of Social Security, Medicare, and federal income tax as of April 15 of the current year show the following: Social Security tax payable (employer and employee), $3,020; Medicare tax payable (employer and employee), $734; FUTA tax payable, $84; SUTA tax payable, $414; and Employees income tax payable, $4,622. Journalize the payment of the Form 941 deposit to UFB and the payment of the SUTA tax to the State of Arizona as of April 15, 20--. ANSWER: GENERAL JOURNAL Post Date Description Ref. Apr. 15 Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Cash

Page 1 Debit 3,020.00 734.00 4,622.00

Credit

8,376.00

15 SUTA Tax Payable Cash

414.00

15 FUTA Tax Payable Cash

84.00

414.00

84.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 2 min. 68. The payroll register for Star Express & Company for the pay period ended January 31, 20--, showed the following: Total Earnings $834,000.00 Taxable Earnings: FUTA 6,700.00 SUTA 6,700.00 Social Security 787,000.00 Deductions: Federal income tax 129,600.00 Social Security tax 48,794.00 Medicare tax 11,411.50 Pension plan 38,450.00 Health insurance 23,400.00 United Way 16,000.00 The Social Security tax rate is 6.2%, Medicare tax is 1.45%, FUTA tax is 0.8%, and SUTA tax is 5.4%. Required: 1. Prepare a journal entry to record the payroll on January 31, 20--. Cengage Learning Testing, Powered by Cognero

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 2.

Prepare a journal entry to record the employer's payroll taxes.

ANSWER:

1. GENERAL JOURNAL Date Description Jan. 31 Wages and Salaries Expense Employee Income Tax Payable Social Security Tax Payable Medicare Tax Payable Pension Plan Deductions Payable Health Insurance Premiums Payable United Way Contributions Payable Cash

Page 1 Post Ref.

Debit 834,000.00

Credit

48,794.00 11,411.50 38,450.00 23,400.00 16,000.00 566,344.50

2. GENERAL JOURNAL Date Description Jan. 31 Payroll Taxes Expense Social Security Tax Payable Medicare Tax Payable FUTA Tax Payable ($6,700 × .008) SUTA Tax Payable ($6,700 ×.054)

Page 1 Post Ref.

Debit 60,620.90

Credit 48,794.00 11,411.50 53.60 361.80

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 69. From the following information from the payroll register of Veronica's Auto Supply Store, calculate the amount of taxable earnings for unemployment and FICA tax, and prepare the journal entry to record the employer's payroll taxes as of April 30, 20--. Social Security tax is 6.2% on the first $94,200 of earnings for each employee. Medicare tax is 1.45% of gross earnings. FUTA tax is 0.8%, and SUTA tax is 5.4% each on the first $7,000 of earnings.

Employee Name Carnavale, Liz O'Malley, Sean Sarlo, Jarred Mandel, Melissa Davenport, Vin

Cumulative Pay Current Taxable Earnings Before Current Gross Unemployment Social Earnings Pay Compensation Security $ 6,400 $1,800 6,850 1,800 109,300 3,700 74,200 3,200 27,500 1,800

ANSWER:

Employee Name Carnavale, Liz O'Malley, Sean Sarlo, Jarred Mandel, Melissa Davenport, Vin

Cumulative Pay Current Taxable Earnings Before Current Gross Unemployment Social Earnings Pay Compensation Security $ 6,400 $ 1,800 $600 $1,800 6,850 1,800 150 1,800 109,300 3,700 800 74,200 3,200 3,200 27,500 1,800 ____ 1,800 $224,250 $12,300 $750 $9,400

GENERAL JOURNAL Date Description Apr. 30 Payroll Taxes Expense Social Security Tax Payable (9,400 × .062) Medicare Tax Payable (12,300 × .0145) FUTA Tax Payable (750 × .008) SUTA Tax Payable (750 × .054)

Page 1 Post Ref.

Debit Credit 807.65 582.80 178.35 6.00 40.50

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 70. Anthony Pescador owns Sundance Florist. He does his banking at United Credit Union (UCU) in Myrtle Beach, South Carolina. The amounts in his general ledger for payroll taxes and the employee's withholding of Social Security, Medicare, and federal income tax as of April 15 of the current year show the following: Social Security tax payable (employer and employee), $3,412; Medicare tax payable (employer and employee), $816; FUTA tax payable, $180; SUTA tax payable, $1,256; and Employee income tax payable, $9,828. Journalize the payment of the Form 941 deposit to UCU and the payment of the SUTA tax to the State of South Carolina as of April 15, 20--. ANSWER: GENERAL JOURNAL Date Apr.

Description Social Security Tax Payable Medicare Tax Payable Employee Income Tax Payable Cash

Page 1 Post Ref.

Debit 3,412.00 816.00 9,828.00

Credit

14,056.00

SUTA Tax Payable Cash

1,256.00

FUTA Tax Payable Cash

180.00

1,256.00

180.00

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 71. Sunny Hills Farm estimated its payroll for the coming year to be $102,000. Its workers' compensation insurance premium rate of 0.6% is paid at the beginning of each quarter. Required: 1. Calculate the estimated cost of workers' compensation insurance for the year. 2. Show the journal entry for the first quarterly payment on January 2, 20--. 3. Assume Sunny Hills Farm's actual payroll for the year was $105,000. Calculate the additional premium owed for 20--. Record the adjustment needed at December 31, 20--. The actual payment of the additional insurance will not take place until January of the following year. ANSWER:

$102,000 × .006 = $612 $612 ÷ 4 = $153 per quarter

1. 2.

GENERAL JOURNAL Date

Description

Page 1 Post Ref.

Workers' Compensation Insurance 2 Expense Cash

Jan.

Debit

Credit

153.00 153.00

$105,000 × .006 = $630 $630 − $612 = $18 additional premium due

GENERAL JOURNAL Date

Dec.

Description

Workers' Compensation Insurance Expense Workers' Compensation Insurance Payable

Page 1 Post Ref.

Debit

Credit

18.00

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 72. ____________________ provides insurance for employees who suffer a job-related illness or injury. ANSWER: Workers' compensation insurance POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.39 - LO: 9-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 73. Compute the amount of employer Social Security taxes by multiplying the Social Security taxable earnings by ____________________. ANSWER: 6.2% POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 74. Taxes levied on employers at the same rates and on the same earnings bases as the employee Social Security and Medicare taxes are known as ____________________. ANSWER: employer FICA taxes POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 75. The ____________________ encourages employers to provide regular employment to workers. ANSWER: merit-rating system POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 76. A(n) ____________________ identifies the employer on all payroll forms and reports filed with the IRS. ANSWER:

Employer Identification Number EIN POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 77. Employer payroll taxes include FUTA, SUTA, and ____________________ taxes. ANSWER: FICA POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 78. The ____________________ tax is levied on employers to raise funds to pay unemployment benefits. ANSWER:

SUTA state unemployment POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.36 - LO: 9-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 79. A system for making federal tax deposits electronically is called the ____________________. ANSWER: Electronic Federal Tax Payment System POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 2 min. 80. By January 31 of each year, employers must provide each employee with a Wage and Tax Statement called ____________________. ANSWER: Form W-2 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 81. Employers use the ____________________ to transmit employees' W-2 forms to the Social Security Administration. ANSWER: Form W-3 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 82. Employer payroll taxes may be deposited either through the Electronic Federal Tax Payment System or by using ____________________. ANSWER: Form 8109 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 83. Employers report payroll taxes withheld each quarter using ____________________. ANSWER: Form 941 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 84. Employers are required to file an annual report of federal unemployment tax using ____________________. ANSWER: Form 940 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.38 - LO: 9-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. Electronic Federal Tax Payment System (EFTPS) b. employer FICA taxes c. Employer Identification Number (EIN) d. Form W-2 e. Form W-3 f. Form 940 g. Form 941 h. FUTA (Federal Unemployment Tax Act) tax i. merit-rating system j. self-employment income k. self-employment tax l. SUTA (state unemployment tax) tax m. workers' compensation insurance DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.36 - LO: 9-1 COLL.HEIN.17.38 - LO: 9-3 COLL.HEIN.17.39 - LO: 9-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-14-Payroll/Other Compensation KEYWORDS: Bloom's: Remembering NOTES: 1 min. 85. Transmittal of Wage and Tax Statements ANSWER: e POINTS: 1 86. Taxes levied on employers at the same rates and on the same earnings bases as the employee FICA taxes. ANSWER: b POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Chapter 9—Payroll Accounting: Employer Taxes and Reports 87. A number that identifies the employer on all payroll forms and reports filed with the IRS. ANSWER: c POINTS: 1 88. A tax levied on employers to raise funds to administer the federal/state unemployment compensation program. ANSWER: h POINTS: 1 89. Provides insurance for employees who suffer a job-related illness or injury. ANSWER: m POINTS: 1 90. A contribution to the FICA program. ANSWER: k POINTS: 1 91. Employee's Wage and Tax Statement ANSWER: d POINTS: 1 92. The net income of a trade or business run by an individual. ANSWER: j POINTS: 1 93. A system to encourage employers to provide regular employment to workers. ANSWER: i POINTS: 1 94. Employer's Quarterly Federal Tax Return ANSWER: g POINTS: 1 95. A tax levied on employers to raise funds to pay unemployment benefits. ANSWER: l POINTS: 1 96. An electronic funds transfer system for making federal tax deposits. ANSWER: a POINTS: 1 97. Employer's Annual Federal Unemployment Tax Return ANSWER: f POINTS: 1

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Chapter 10—Accounting for Sales and Cash Receipts 1. To encourage customers who purchase merchandise on account to pay promptly, a cash discount is usually offered. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. A sales ticket is a document created as evidence of a sale in a retail business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. Selling goods on account is not common practice at the retail level of the distribution process. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 4. Merchandise returned by the customer for a refund is called a sales return. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. A credit memo states the amount of a sales allowance or return. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. The sales account is credited for the selling price of merchandise sold during the period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 7. Sales Returns and Allowances is debited for the selling price, including sales tax, of any merchandise returned by customers. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. If the amount of sales returns and allowances is large in proportion to gross sales, a weakness in the merchandising operations is indicated and the trouble should be determined and corrected. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. Net sales less sales returns and allowances and sales discounts equal gross sales. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 10. The amounts for sales returns and allowances, sales discounts, and net sales added together equal gross sales. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. When a business uses a subsidiary accounts receivable ledger, there is no need to keep an accounts receivable account in the general ledger. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.42 - LO: 10-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. The accounts receivable ledger is simply a detailed listing of the same information that is summarized in Accounts Receivable in the general ledger. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.42 - LO: 10-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 13. A common approach to keeping a record of each customer's account receivable is to use a subsidiary accounts receivable ledger. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.42 - LO: 10-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. After the posting of the accounts receivable ledger and the general ledger is completed, the total of the accounts receivable ledger balances should equal the Accounts Receivable balance in the general ledger. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.42 - LO: 10-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. After all posting to the general ledger is completed, the accounts receivable, sales tax payable, and sales accounts in the general ledger are up to date. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.42 - LO: 10-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 10—Accounting for Sales and Cash Receipts 16. To verify that the sum of the accounts receivable ledger balances equals the Accounts Receivable balance, a schedule of accounts receivable is prepared. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.43 - LO: 10-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. If any merchandise has been returned, the sales discount is calculated on the net sales amount. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. A retail business allows customers to enter the store, select the merchandise they want, and bring it to a sales clerk. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 19. Merchandise returned by a customer for a refund is called a sales discount. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. Reductions in the price of merchandise granted by the seller because of defects or other problems with the merchandise are called merchandise sales. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. The sales account is a revenue account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 22. The sales tax payable account is a revenue account that is credited for the amount of tax imposed on sales. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. While sales returns and allowances can be debited directly to the sales account, it is better to debit a separate sales returns and allowances account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. To a seller, cash discounts are considered the same as sales discounts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 25. Sales Tax Payable is a liability account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. For the merchant, bank credit card sales are nothing like cash sales. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.42 - LO: 10-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. Sales made on account normally lead to cash receipts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.42 - LO: 10-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 28. To verify that the sum of the accounts receivable ledger balances equals the Accounts Receivable balance, a schedule of accounts payable is prepared. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.43 - LO: 10-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. If the schedule of accounts receivable total and the Accounts Receivable balance total do not agree, a correcting entry is made to balance the two totals. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.43 - LO: 10-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 30. A business that purchases clothing, furniture, computers, or other products to sell to other businesses is a a. retail business. b. not-for-profit business. c. wholesale business. d. service business ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-03-Business Forms KEYWORDS: Bloom's: Remembering NOTES: 1 min. 31. Copies of a sales invoice are used to do all of the following EXCEPT a. ship the merchandise. b. bill the customer. c. record the sale. d. record the receipt of merchandise. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 32. If the seller permits merchandise to be returned or an allowance to be made, it is customary for the seller to issue a(n) a. debit memorandum. b. return memorandum. c. credit memorandum. d. allowance memorandum. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. The account in which the revenue earned from the sale of merchandise is entered is a. Capital. b. Sales. c. Cash. d. Inventory. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 34. Merchandise is sold on account for $90, and the sale is subject to a retail sales tax of $5.40. The sales account should be credited for a. $84.60. b. $90.00. c. $95.40. d. $93.60. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. Which of the following accounts is NOT used to account for merchandise sales transactions? a. Sales b. Sales Tax Payable c. Sales Returns and Allowances d. Accounts Payable ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 36. A customer returns merchandise that was delivered in poor condition and that does not meet specification. The account that the seller would debit for the amount of the return is a. Sales Returns and Allowances. b. Purchase Returns and Allowances. c. Sales. d. Purchases. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 37. A credit memorandum for $156 (sale price of merchandise $150; sales tax of $6) was issued to a customer for goods returned that had been purchased on account. To enter this transaction properly, a. Sales would be debited for $6. b. Sales would be debited for $150. c. Sales would be debited for $156. d. Sales would not be debited. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 38. After posting is completed in the accounts receivable ledger and the general ledger, the total of the accounts receivable ledger balances should equal the a. accounts payable account balance. b. accounts receivable account balance. c. cash account balance. d. net income amount. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.42 - LO: 10-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 39. A schedule of accounts receivable is prepared to a. verify that the sum of the accounts receivable ledger balances equals the Accounts Receivable balance. b. send to all customers at the end of the month. c. prove that the general ledger and accounts receivable ledger were posted at the same time. d. keep track of all the company's customers. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.43 - LO: 10-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 40. A summary accounts receivable account is called a(n) a. controlling account. b. balance account. c. master account. d. lead account. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.42 - LO: 10-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 41. The source document of a sales transaction is called a a. sales ticket. b. sales return. c. purchase order. d. purchase receipt. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 42. Merchandise returned by the customer for a refund is called a a. sales return. b. sales allowance. c. credit memo. d. debit memo. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 43. To enter a cash sale, the journal entry includes a. debiting Sales, debiting Sales Tax Payable, and crediting Cash. b. debiting Sales Tax Payable, debiting Cash, and crediting Sales. c. debiting Sales, debiting Cash, and crediting Sales Tax Payable. d. debiting Cash, crediting Sales, and crediting Sales Tax Payable. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 44. Merchandise is sold on account for $90, and the sale is subject to a retail sales tax of $6.40. The amount that should be added to Accounts Receivable would be a. $6.40. b. $94.60. c. $83.60. d. $96.40. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 45. The account that would be credited for the amount of tax collected and paid on sales would be a. Sales. b. Sales Tax Payable. c. Cash. d. Accounts Payable. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 46. A credit memorandum for $156 (sales price of merchandise, $150; sales tax $6) was issued to a customer for goods returned that had been purchased on account. To enter this transaction properly, a. Accounts Receivable would be credited for $6. b. Accounts Receivable would be credited for $150. c. Accounts Receivable would be credited for $156. d. Accounts Receivable would not be credited. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 47. Total sales less the sales price of any goods returned by customers, less any reduction in price given to customers, less cash discounts allowed by the seller, is called a. cost of goods sold. b. gross margin. c. net sales. d. gross profit. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 48. A common approach to keeping a record of each customer's accounts receivable is to use a a. sales journal. b. subsidiary accounts receivable ledger. c. controlling account. d. general journal. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.42 - LO: 10-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 49. For the merchant, bank credit card sales are treated in a manner similar to a. sales on account. b. cash sales. c. installment sales. d. layaway sales. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.43 - LO: 10-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 50. A list showing the amount due from each customer as of a specified date is known as a a. trial balance. b. schedule of accounts payable. c. schedule of accounts receivable. d. work sheet. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.43 - LO: 10-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 51. A schedule of accounts receivable is prepared from the a. list of customer accounts in the accounts receivable ledger. b. general journal. c. sales journal. d. general ledger. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.43 - LO: 10-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 10—Accounting for Sales and Cash Receipts 52. A schedule of accounts receivable is normally prepared a. following each transaction. b. daily. c. weekly. d. monthly. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.43 - LO: 10-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 53. From the following data, compute net sales. Sales Sales returns and allowances Sales discounts Sales Less: Sales returns and allowances Sales discounts Net sales POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Understanding NOTES: 2 min.

$537,000 6,315 715 $537,000

ANSWER:

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$6,315 715

7,030 $529,970

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Chapter 10—Accounting for Sales and Cash Receipts 54. The accounts receivable account in the general ledger has a balance of $11,280. The accounts receivable ledger has the following account balances: A. Broccoli B. Reilly C. Greenspan J. Fuentez Determine how much J. Fuentez owes.

$3,242 1,610 4,723 ?

$11,280 − ($3,242 + $1,610 + $4,723) = $1,705 1 Easy COLL.HEIN.17.42 - LO: 10-3 COLL.HEIN.17.43 - LO: 10-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Understanding NOTES: 2 min. ANSWER: POINTS: DIFFICULTY: LEARNING OBJECTIVES:

55. Bernice Ruel operates Leather Unlimited, a leather shop that sells luggage, handbags, business cases, and other leather goods. During the month of March, the following transactions occurred. The applicable sales tax rate is 6%. Mar. 2 9 12 18 19 22 26 28 29 31 31

Sold merchandise on account to Emma Sommers, $250.00, plus sales tax. Sold merchandise on account to Shelly Feinstein, $470.00, plus sales tax. Emma Sommers returned $40.00 worth of merchandise purchased on March 2 for credit. Sold merchandise on account to Maureen Hodge, $110.00, plus sales tax. Sold merchandise on account to Frank MacDonald, $165.00, plus sales tax. Received payment from Emma Sommers on account. Maureen Hodge was given an allowance of $30.00 when she reported damage in the merchandise purchased on March 18. Sold merchandise on account to Emma Sommers, $500.00, plus sales tax. Sold merchandise on account to Shelly Feinstein, $230.00, plus sales tax. Received payment from Maureen Hodge on account. Cash sales for the month were $2,600, plus sales tax.

Required: 1. Enter the above transactions in the general journal. 2. Post the entries from the journal to the general ledger and subsidiary ledgers provided. 3. Prepare a schedule of accounts receivable as of March 31, 20--. GENERAL JOURNAL Date

Description

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Page 1 Post Ref.

Debit

Credit

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Chapter 10—Accounting for Sales and Cash Receipts

GENERAL LEDGER Account Cash

Date

Account No. 101

Item

Post Ref.

Debit

Credit

Account Accounts Receivable

Date

Item

Post Ref.

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Balance Debit Credit

Account No. 122

Debit

Credit

Balance Debit Credit

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Chapter 10—Accounting for Sales and Cash Receipts

Account Sales Tax Payable Post Date Item Ref.

Debit

Credit

Account No. 231 Balance Debit Credit

Credit

Account No. 401 Balance Debit Credit

Credit

Account No. 401.1 Balance Debit Credit

Account Sales Date

Item

Post Ref.

Debit

Account Sales Returns and Allowances Post Date Item Ref. Debit

Account Shelly Feinstein Date

Item

Post Ref.

Debit

Credit

Balance

Post Ref.

Debit

Credit

Balance

Account Maureen Hodge Date

Item

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Page 25

Chapter 10—Accounting for Sales and Cash Receipts

Account Frank MacDonald Date

Item

Post Ref.

Debit

Credit

Balance

Post Ref.

Debit

Credit

Balance

Account Emma Sommers Date

Item

ANSWER: GENERAL JOURNAL Post Date Description Ref. 2 Accounts Receivable/Emma Mar. Sommers 122/ Sales 401 Sales Tax Payable 231 9 Accounts Receivable/Shelly Feinstein Sales Sales Tax Payable

Cengage Learning Testing, Powered by Cognero

Page 1 Debit 265.00 250.00 15.00

122/ 401 231

498.20

401.1 231

40.00 2.40

470.00 28.20

12 Sales Returns and Allowances Sales Tax Payable Accounts Receivable/Emma Sommers

122/

18 Accounts Receivable/Maureen Hodge Sales Sales Tax Payable

122/ 401 231

116.60

19 Accounts Receivable/Frank MacDonald Sales Sales Tax Payable

122/ 401 231

174.90

101

222.60

22 Cash Accounts Receivable/Emma Sommers

122/

26 Sales Returns and Allowances

401.1

Credit

42.40

110.00 6.60

165.00 9.90

222.60 30.00 Page 26

Chapter 10—Accounting for Sales and Cash Receipts Sales Tax Payable Accounts Receivable/Maureen Hodge

231

180

122/

31.80

28 Accounts Receivable/Emma

Sommers Sales Sales Tax Payable

122/

530.00 500.00 30.00

401

231

29 Accounts Receivable/Shelly Feinstein Sales Sales Tax Payable

122/ 401 231

31 Cash

101

Accounts Receivable/Maureen Hodge

243.80 230.00 13.80 84.80

122/

31 Cash Sales Sales Tax Payable

84.80

101 2,756.00 401 231

2,600.00 156.00

GENERAL LEDGER Account Cash Date Mar. 22 31 31

Item

Post Ref. J1 J1 J1

Account Accounts Receivable Post Date Item Ref. Mar. 2 J1 9 J1 12 J1 18 J1 19 J1 22 J1 26 J1 28 J1 29 J1 31 J1 Account Sales Tax Payable Post Cengage Learning Testing, Powered by Cognero

Debit 222.60 84.80 2,756.00

Debit 265.00 498.20

Credit

42.40 116.60 174.90 222.60 31.80 530.00 243.80 84.80

Account No. 101 Balance Debit Credit 222.60 307.40 3,063.40 Account No. 122 Balance Debit Credit 265.00 763.20 720.80 837.40 1,012.30 789.70 757.90 1,287.90 1,531.70 1,446.90 Account No. 231 Balance Page 27

Chapter 10—Accounting for Sales and Cash Receipts Date Mar. 2 9 12 18 19 26 28 29 31

Item

Ref. J1 J1 J1 J1 J1 J1 J1 J1 J1

Debit

Credit 15.00 28.20

30.00 13.80 156.00

Credit 15.00 43.20 40.80 47.40 57.30 55.50 85.50 99.30 255.30

Credit 250.00 470.00 110.00 165.00 500.00 230.00 2,600.00

Account No. 401 Balance Debit Credit 250.00 720.00 830.00 995.00 1,495.00 1,725.00 4,325.00

2.40 6.60 9.90 1.80

Account Sales Date Mar. 2

Item

18 19 28 29 31

Post Ref. J1 J1 J1 J1 J1 J1 J1

Debit

Account Sales Returns and Allowances Post Date Item Ref. Debit Mar. 12 J1 40.00 26 J1 30.00

Credit

Account No. 401.1 Balance Debit Credit 40.00 70.00

ACCOUNTS RECEIVABLE LEDGER Account Shelly Feinstein Post Date Item Ref. Debit Credit Mar. 9 J1 498.20 29 J1 243.80

Balance 498.20 742.00

Account Maureen Hodge Date Mar. 18

Item

Post Ref. J1 J1

Debit 116.60

Credit 31.80 84.80

Balance 116.60 84.80 0.00

Account Frank MacDonald Date Mar. 19 Cengage Learning Testing, Powered by Cognero

Item

Post Ref. J1

Debit 174.90

Credit

Balance 174.90 Page 28

Chapter 10—Accounting for Sales and Cash Receipts Account Emma Sommers Date Mar. 2 12 22 28

Item

Post Ref. J1 J1 J1 J1

Debit 265.00

Credit 42.40 222.60

530.00

Balance 265.00 222.60 0.00 530.00

Leather Unlimited Schedule of Accounts Receivable March 31, 20-Shelly Feinstein Frank MacDonald Emma Sommers Total POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 COLL.HEIN.17.41 - LO: 10-2 COLL.HEIN.17.42 - LO: 10-3 COLL.HEIN.17.43 - LO: 10-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Understanding NOTES: 30 min.

$ 742.00 174.90 530.00 $1,446.90

56. From the accounts receivable ledger, prepare a schedule of accounts receivable for Jenn's Country Store as of March 31, 20--. ACCOUNTS RECEIVABLE LEDGER Account Brandon Connors Post Date Item Ref. Debit Credit Mar. 1 J1 23,652.00 10 J2 23,652.00 14 J2 12,317.00

Balance 23,652.00 0.00 12,317.00

Account Collin Deluca Date Mar. 10 15

Item

Post Ref. J2 J2

Debit 1,401.00 2,263.00

Credit

Balance 1,401.00 3,664.00

Account Meghan Deutsch Post Cengage Learning Testing, Powered by Cognero

Page 29

Chapter 10—Accounting for Sales and Cash Receipts Date Mar. 9 19

Item

Ref. J1 J2

Debit 89.00 2,568.00

Credit

Balance 89.00 2,657.00

Debit 3,501.00

Credit

Balance 3,501.00 0.00 219.00 2,585.00

Account Carmen Perez Date Mar. 4 14 15 29

Item

Post Ref. J1 J2 J2 J3

3,501.00 219.00 2,366.00

Account Ashley Smyth Date Mar. 4 8 14

Item

Post Ref. J1 J1 J2

Debit 1,139.00 1,423.00

Post Ref. J2 J3

Debit 6,189.00

Credit

1,139.00

Balance 1,139.00 2,562.00 1,423.00

Account Miles Weitz Date Mar. 15 22

Item

Credit 6,189.00

Balance 6,189.00 0.00

ANSWER: Jenn's Country Store Schedule of Accounts Receivable March 31, 20-Brandon Connors Collin Deluca Meghan Deutsch Carmen Perez Ashley Smyth Total POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.43 - LO: 10-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Understanding NOTES: 3 min.

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$12,317 3,664 2,657 2,585 1,423 $22,646

Page 30

Chapter 10—Accounting for Sales and Cash Receipts 57. From the following data, compute net sales. Sales Sales returns and allowances Sales discounts

$727,500 6,421 434

Sales Less: Sales returns and allowances Sales discounts Net sales POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Understanding NOTES: 3 min.

$727,500

ANSWER:

$6,421 434

6,855 $720,645

58. During the month of September, the following transactions occurred. The applicable sales tax rate is 6%. Enter the transactions in the general journal. Sept. 2 7 12 22 28

Sold merchandise on account to Sam Larson, $1,400, plus sales tax. Sold merchandise on account to David Mitchell, $1,900, plus sales tax. Issued credit memorandum to Sam Larson for $689, including sales tax of $39. Sold merchandise on account to Matt Feustal, $500, plus sales tax. Sold merchandise on account to Ana Cardona, $850, plus sales tax. GENERAL JOURNAL

Date

Description

Cengage Learning Testing, Powered by Cognero

Page 1 Post Ref.

Debit

Credit

Page 31

Chapter 10—Accounting for Sales and Cash Receipts

ANSWER: GENERAL JOURNAL Post Date Description Ref. Sept. 2 Accounts Receivable/Sam Larson Sales Sales Tax Payable

Page 1 Debit 1,484.00

Credit 1,400.00 84.00

7 Accounts Receivable/David Mitchell Sales Sales Tax Payable

2,014.00

12 Sales Returns and Allowances Sales Tax Payable Accounts Receivable/Sam Larson

650.00 39.00

22 Accounts Receivable/Matt Feustal Sales Sales Tax Payable

530.00

28 Accounts Receivable/Ana Cardona Sales Sales Tax Payable

901.00

1,900.00 114.00

689.00

500.00 30.00

850.00 51.00

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Easy COLL.HEIN.17.40 - LO: 10-1 COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Understanding NOTES: 3 min. 59. From the following general journal transactions, post to the general ledger and the accounts receivable ledger provided. Once posted, prepare a schedule of accounts receivable and compute the net sales for the month. GENERAL JOURNAL Date Description Jan. 2 Accounts Receivable/L. Miller Sales Cengage Learning Testing, Powered by Cognero

Page 1 Post Ref.

Debit 1,040.00

Credit 1,000.00 Page 32

Chapter 10—Accounting for Sales and Cash Receipts Sales Tax Payable

40.00

7 Accounts Receivable/P. Peterson Sales Sales Tax Payable

520.00

10 Accounts Receivable/B. Brown Sales Sales Tax Payable

208.00

10 Cash Sales Discounts Accounts Receivable/L. Miller

1,030.00 10.00

15 Accounts Receivable/P. Peterson Sales Sales Tax Payable

624.00

19 Cash Sales Discounts Accounts Receivable/P. Peterson

515.00 5.00

22 Accounts Receivable/D. Jorgenson Sales Sales Tax Payable

728.00

23 Sales Returns and Allowances Sales Tax Payable Accounts Receivable/D. Jorgenson

100.00 4.00

25 Cash Sales Sales Tax Payable

2,184.00

500.00 20.00

200.00 8.00

1,040.00

600.00 24.00

520.00

700.00 28.00

104.00

2,100.00 84.00

GENERAL LEDGER Account Cash Date

Item

Post Ref.

Account Accounts Receivable Post Cengage Learning Testing, Powered by Cognero

Debit

Credit

Account No. 101 Balance Debit Credit

Account No. 122 Balance Page 33

Chapter 10—Accounting for Sales and Cash Receipts Date

Item

Ref.

Debit

Account Sales Tax Payable Post Date Item Ref.

Debit

Credit

Debit

Credit

Account No. 231 Balance Debit Credit

Account Sales Date

Item

Post Ref.

Debit

Account Sales Returns and Allowances Post Date Item Ref. Debit

Credit

Item

Post Ref.

Debit

Account No. 401 Balance Debit Credit

Credit

Account No. 401.1 Balance Debit Credit

Credit

Account No. 401.2 Balance Debit Credit

Account Sales Discounts Date

Credit

ACCOUNTS RECEIVABLE LEDGER Account B. Brown Post Cengage Learning Testing, Powered by Cognero

Page 34

Chapter 10—Accounting for Sales and Cash Receipts Date

Item

Ref.

Debit

Credit

Balance

Item

Post Ref.

Debit

Credit

Balance

Item

Post Ref.

Debit

Credit

Balance

Post Ref.

Debit

Credit

Balance

Account D. Jorgenson Date

Account L. Miller Date

Account P. Peterson Date

Item

ANSWER: GENERAL JOURNAL Post Date Description Ref. Jan. 2 Accounts Receivable/L. Miller 122/ Sales Sales Tax Payable 7 Accounts Receivable/P. Peterson

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Debit 1,040.00

401 231 122/

Sales Sales Tax Payable

401 231

10 Accounts Receivable/B. Brown

122/

Sales Sales Tax Payable

401 231

10 Cash Sales Discounts Accounts Receivable/L. Miller

Page 1

101 401.2 122/

Credit

1,000.00 40.00 520.00 500.00 20.00 208.00 200.00 8.00 1,030.00 10.00 1,040.00

Page 35

Chapter 10—Accounting for Sales and Cash Receipts 15 Accounts Receivable/P. Peterson

122/

Sales Sales Tax Payable

624.00

401 231

600.00 24.00

19 Cash Sales Discounts Accounts Receivable/P. Peterson

101 401.2 122/

515.00 5.00

22 Accounts Receivable/D. Jorgenson

122/

728.00

520.00

Sales Sales Tax Payable

401 231

23 Sales Returns and Allowances

401.1 231 122/

100.00 4.00

101 401 231

2,184.00

Sales Tax Payable Accounts Receivable/D. Jorgenson

25 Cash Sales Sales Tax Payable

700.00 28.00

104.00

2,100.00 84.00

GENERAL LEDGER Account Cash Date Jan. 10 19 25

Item

Post Ref. J1 J1 J1

Debit 1,030.00 515.00 2,184.00

Account Accounts Receivable Post Date Item Ref. Debit Jan. 2 J1 1,040.00 7 J1 520.00 10 J1 208.00 10 J1 15 J1 624.00 19 J1 22 J1 728.00 23 J1 Account Sales Tax Payable Post Date Item Ref. Cengage Learning Testing, Powered by Cognero

Debit

Credit

1,040.00 520.00

Credit

Account No. 101 Balance Debit Credit 1,030.00 1,545.00 3,729.00 Account No. 122 Balance Debit Credit 1,040.00 1,560.00 1,768.00 728.00 1,352.00 832.00 1,560.00 1,456.00 Account No. 231 Balance Debit Credit Page 36

Chapter 10—Accounting for Sales and Cash Receipts Jan.

2 7 10 15 22 23 25

J1 J1 J1 J1 J1 J1 J1

40.00 20.00 8.00 24.00 28.00 84.00

40.00 60.00 68.00 92.00 120.00 116.00 200.00

Credit 1,000.00 500.00 200.00 600.00 700.00 2,100.00

Account No. 401 Balance Debit Credit 1,000.00 1,500.00 1,700.00 2,300.00 3,000.00 5,100.00

4.00

Account Sales Date Jan. 2 7 10 15 22

Item

Post Ref. J1 J1 J1 J1 J1 J1

Debit

Account Sales Returns and Allowances Post Date Item Ref. Debit Jan. 23 J1 100.00

Credit

Account Sales Discounts Date Jan. 10 19

Item

Post Ref. J1 J1

Debit 10.00 5.00

Credit

Account No. 401.1 Balance Debit Credit 100.00 Account No. 401.2 Balance Debit Credit 10.00 15.00

ACCOUNTS RECEIVABLE LEDGER Account B. Brown Post Date Item Ref. Debit Credit Jan. 10 J1 208.00

Balance 208.00

Account D. Jorgenson Date Jan. 22 23

Item

Post Ref. J1 J1

Debit 728.00

Post Ref. J1 J1

Debit 1,040.00

Credit 104.00

Balance 728.00 624.00

Account L. Miller Date Jan. 2 10 Cengage Learning Testing, Powered by Cognero

Item

Credit 1,040.00

Balance 1,040.00 0.00 Page 37

Chapter 10—Accounting for Sales and Cash Receipts Account P. Peterson Date Jan. 7 15 19

Item

Post Ref. J1 J1 J1

Debit 520.00 624.00

Credit

520.00

Balance 520.00 1,144.00 624.00

Schedule of Accounts Receivable January 31, 20-B. Brown D. Jorgenson P. Peterson Total

$ 208 624 624 $1,456

Sales Less: Sales returns and allowances Sales discounts Net Sales POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 COLL.HEIN.17.41 - LO: 10-2 COLL.HEIN.17.42 - LO: 10-3 COLL.HEIN.17.43 - LO: 10-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Understanding NOTES: 15 min.

$5,100 $100 15

115 $4,985

60. From the accounts receivable ledger, prepare a schedule of accounts receivable for Robinson's Auto Supply Center as of May 31, 20--. ACCOUNTS RECEIVABLE LEDGER Account Sal Buchemi Post Date Item Ref. Debit Credit May 9 J1 89.00 19 J2 215.00

Balance 89.00 304.00

Account Grace Carlton Date May 10 15

Item

Post Ref. J2 J2

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Debit 11,401.00 2,263.00

Credit

Balance 11,401.00 13,664.00 Page 38

Chapter 10—Accounting for Sales and Cash Receipts

Account Pat Heins Date May 15 22

Item

Post Ref. J2 J3

Debit 5,278.00

Post Ref. J1 J1 J2

Debit 1,139.00 423.00

Credit 5,278.00

Balance 5,278.00 0.00

Account Falana Moore Date May 4 8 14

Item

Credit

1,139.00

Balance 1,139.00 1,562.00 423.00

Account Peggy Nelson Date May 1 10 14

Item

Post Ref. J1 J2 J2

Debit 23,652.00

Credit 23,652.00

13,236.00

Balance 23,652.00 0.00 13,236.00

Account Will Sache Date May 4 14 15 29

Item

Post Ref. J1 J2 J2 J3

Debit 3,501.00

Credit 3,501.00

1,219.00 2,366.00

Balance 3,501.00 0.00 1,219.00 3,585.00

ANSWER: Robinson's Auto Supply Center Schedule of Accounts Receivable May 31, 20-Sal Buchemi Grace Carlton Falana Moore Peggy Nelson Will Sache Total POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.43 - LO: 10-4 ACCREDITING STANDARDS: AICPA FN-Measurement Cengage Learning Testing, Powered by Cognero

304 13,664 423 13,236 3,585 $31,212

Page 39

Chapter 10—Accounting for Sales and Cash Receipts

TOPICS: KEYWORDS: NOTES:

BUSPROG: Analytic ACBSP: APC-18-Special Journals Bloom's: Understanding 2 min.

61. The accounts receivable account in the general ledger has a balance of $10,848. The accounts receivable ledger has the following account balances: V. Giancola A. Nodell H. O'Brien C. Chan Determine how much C. Chan owes.

$3,126 1,893 2,412 ?

$10,848 − ($3,126 + $1,893 + $2,412) = $3,417 1 Easy COLL.HEIN.17.42 - LO: 10-3 COLL.HEIN.17.43 - LO: 10-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Understanding NOTES: 2 min. ANSWER: POINTS: DIFFICULTY: LEARNING OBJECTIVES:

62. A(n) ____________________ is a document that is generated to bill the customer who made the purchase. ANSWER: sales invoice POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 40

Chapter 10—Accounting for Sales and Cash Receipts 63. The document created as evidence of a sale in a retail business is a(n) ____________________. ANSWER: sales ticket POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 64. To the seller, a cash discount is also considered a(n) ____________________. ANSWER: sales discount POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 65. Net sales is equal to gross sales less ____________________ and ____________________. ANSWER:

sales returns and allowances, sales discounts sales discounts, sales returns and allowances POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.41 - LO: 10-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 41

Chapter 10—Accounting for Sales and Cash Receipts 66. A(n) ____________________ purchases merchandise and sells that merchandise to its customers. ANSWER: merchandising business POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 67. Reductions in the price of merchandise, known as a(n) ____________________, are granted by the seller because of defects or other problems with the merchandise. ANSWER: sales allowance POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 68. A(n) ____________________ is a special ledger containing an individual account receivable for each customer. ANSWER: accounts receivable ledger POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.42 - LO: 10-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 42

Chapter 10—Accounting for Sales and Cash Receipts 69. A document that is issued when credit is given for merchandise returned or for an allowance is called a(n) ____________________. ANSWER: credit memo POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 70. A(n) ____________________ is given to encourage prompt payment by customers who buy merchandise on account. ANSWER: cash discount POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 71. The alphabetical or numerical listing of customer accounts and balances, known as a(n) ____________________, is usually prepared at the end of the month. ANSWER: schedule of accounts receivable POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.43 - LO: 10-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 43

Chapter 10—Accounting for Sales and Cash Receipts 72. A(n) ____________________ is merchandise returned by a customer for a refund. ANSWER: sales return POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 73. A summary account, called a(n) ____________________, is maintained in the general ledger for a subsidiary ledger. ANSWER: controlling account POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.40 - LO: 10-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. accounts receivable ledger b. cash discounts c. controlling account d. credit memo e. merchandising business f. sale g. sales allowances h. sales discounts i. sales invoice j. sales return k. sales ticket l. schedule of accounts receivable DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.40 - LO: 10-1 COLL.HEIN.17.41 - LO: 10-2 COLL.HEIN.17.42 - LO: 10-3 COLL.HEIN.17.43 - LO: 10-4 ACCREDITING STANDARDS: AICPA FN-Measurement Cengage Learning Testing, Powered by Cognero

Page 44

Chapter 10—Accounting for Sales and Cash Receipts BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 74. A summary account maintained in the general ledger for a subsidiary ledger (for example, the accounts receivable ledger). ANSWER: c POINTS: 1 75. Merchandise returned by a customer for a refund. ANSWER: j POINTS: 1 76. A transfer of merchandise from one business or individual to another in exchange for cash or a promise to pay cash. ANSWER: f POINTS: 1 77. Discounts to encourage prompt payment by customers who buy merchandise on account. ANSWER: b POINTS: 1 78. The seller's term for cash discounts. ANSWER: h POINTS: 1 79. A document issued when credit is given for merchandise returned or for an allowance. ANSWER: d POINTS: 1 80. A document that is generated to bill the customer who made the purchase. ANSWER: i POINTS: 1 81. An alphabetical or numerical listing of customer accounts and balances, usually prepared at the end of the month. ANSWER: l POINTS: 1 82. A document created as evidence of a sale in a retail business. ANSWER: k POINTS: 1 83. A separate ledger containing an individual account receivable for each customer, kept in either alphabetical or numerical order. ANSWER: a POINTS: 1 Cengage Learning Testing, Powered by Cognero

Page 45

Chapter 10—Accounting for Sales and Cash Receipts 84. Reductions in the price of merchandise granted by the seller because of defects or other problems with the merchandise. ANSWER: g POINTS: 1 85. Purchases merchandise such as clothing, furniture, or computers, and sells that merchandise to its customers. ANSWER: e POINTS: 1

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Chapter 11—Accounting for Purchases and Cash Payments 1. A written order by a buyer for merchandise or other property specified in a purchase requisition is known as a purchase invoice. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. A source document prepared by the seller that lists the items shipped, their cost, and the method of shipment is commonly referred to by the seller as a purchase invoice. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. Major documents used in the purchasing process are the purchase requisition, purchase order, receiving report, and sales invoice. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 11—Accounting for Purchases and Cash Payments 4. The supplier or vendor is the person or firm from whom the merchandise or other property is ordered. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. Special discounts on list prices granted to different classes of customers are known as trade discounts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. Merchandise inventory at the beginning of the period minus purchases plus merchandise inventory at the end of the period equals cost of goods sold for the period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 7. Freight-In is an adjunct-purchases account to which transportation charges on merchandise purchases are debited. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. When the merchandise is received, a receiving report indicating what has been received is prepared. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. In entering in the books an invoice that involves a trade discount, the amount to be used is the net amount after the trade discount is subtracted. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 10. Postings to the accounts payable ledger should be made at the end of the month only. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.46 - LO: 11-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. A schedule of accounts payable is used to prove that the sum of the accounts payable ledger balances equals the Accounts Payable balance in the general ledger. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.47 - LO: 11-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. Trade discounts represent a reduction in the price of the merchandise and should not be entered in the accounts of either the seller or the buyer. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 13. Purchases Returns and Allowances is the contra-purchases account to which purchases returns and purchases allowances are credited. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-16-Current Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. The purchases discounts account is debited for cash discounts to customers. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-16-Current Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. FOB destination means free on board at the destination of the shipment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 16. FOB shipping point means free on board at destination of the shipment. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-16-Current Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. If the merchandise received is damaged or unsatisfactory, an adjustment may be made that is referred to as an allowance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-16-Current Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. For merchandising businesses, the term "purchases" refers only to merchandise acquired for resale. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 19. A trade discount is often offered by wholesalers. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. The first document created in the purchasing process normally is the purchase requisition. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. The first step in the purchasing process involves preparing a purchase order. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 22. A form used to request the purchasing department to purchase merchandise or other property is known as a purchase order. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. Gross profit is a measure of the amount of sales dollars available to cover expenses after covering the cost of the goods sold. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. After the posting of the accounts payable ledger and the general ledger is completed, the total of the accounts payable ledger balances should equal the Accounts Payable balance in the general ledger. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.46 - LO: 11-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 11—Accounting for Purchases and Cash Payments 25. Purchases Returns and Allowances is a contra-purchases account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.46 - LO: 11-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. Discounts from quoted prices which are contingent on prompt payment of invoices, within a stated discount period, are called cash discounts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. If the terms specified on an invoice are 2/10, n/30, this means that a discount of 2% will be allowed if payment is made within 30 days from the date of the invoice. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 28. If the terms of an invoice dated April 10 are 3/10, n/30, the invoice must be paid on or before April 20 in order to be entitled to a discount. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. An invoice is never subject to both trade and cash discounts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. Purchases Discounts is a contra-purchases account used to record cash discounts allowed on purchases. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 31. An account number in the Posting Reference column of the general journal indicates that the account has been posted to the general ledger. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.46 - LO: 11-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. A schedule of accounts payable is prepared from the list of accounts in the accounts receivable ledger. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.48 - LO: 11-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. (Appendix) If purchases are recorded at the net amount, assuming that all available cash discounts will be taken, the net-price method of recording the purchase has been used. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 34. (Appendix) The purchases discounts lost account is only used with the gross-price method of recording purchases. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. A written order by a buyer for merchandise or other property specified in a purchase requisition is known as a a. purchase invoice. b. purchase order. c. purchase requisition. d. receiving report. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 36. A printed price of a manufacturer or wholesaler that is subject to trade discounts is called a. net price. b. gross price. c. list price. d. retail price. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 37. A source document prepared by the seller that lists the items shipped, their cost, and the method of shipment is commonly referred to by the seller as the a. sales invoice. b. purchase invoice. c. receiving report. d. purchase requisition. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-16-Current Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 38. Special discounts from list prices, granted by manufacturers to different classes of customers, are known as a. cash discounts. b. trade discounts. c. manufacturers' discount. d. customers' discounts. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 39. Assume the gross amount of an invoice is $200 and a trade discount of 10% is allowed. The amount to be entered in the accounting records would be a. $20. b. $220. c. $200. d. $180. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 40. Assume the gross amount of an invoice is $200 and a discount of 20% is allowed. The amount of the trade discount totals a. $20. b. $65. c. $40. d. $80. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 41. A discount offered as an inducement for prompt payment of an invoice is called a(n) a. trade discount. b. invoice discount. c. early discount. d. cash discount. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 42. The terms on an invoice are 4/15, n/30. This means that a. a discount of 4% will be allowed if payment is made within 15 days from the date of the invoice. b. a discount of 15% will be allowed if payment is made with 4 days from the date of the invoice. c. a discount of 4% will be allowed if payment is made by the 15th of the month. d. a discount of 15% will be allowed if payment is made by the 4th day after the date of the invoice. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 43. Assume the gross amount of an invoice is $100 and a discount of 20% is allowed. The net amount is a. $65. b. $80. c. $20. d. $40. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 44. An invoice in the amount of $916 is subject to a trade discount of 10% and credit terms of 3/10, n/30. The amount of the trade discount would be a. $24.73. b. $27.48. c. $91.60. d. $824.40. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 45. Which of the following indicates that a shipment is free on board at the destination of the shipment and the seller will pay the transportation costs? a. COD b. FOB shipping point c. FOB destination d. 4/10, EOM ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 46. Which of the following indicates that the shipment is free on board at the final point of shipment and the seller must pay all transportation costs? a. COD b. FOB shipping point c. FOB destination d. 4/10, EOM ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 47. An invoice in the amount of $916 is subject to a trade discount of 10% and credit terms on 3/10, n/30. If the invoice is not paid within the discount period, the amount that would be paid to satisfy the invoice would be a. $824.40. b. $888.52. c. $981.27. d. $916.00. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 48. Which of the following credit terms allows a discount of 2% if payment is made within 10 days with the total amount of the invoice due within 60 days? a. 2/10, n/30 b. 2/10, EOM/60 c. 10/2, n/60 d. 2/10, n/60 ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 49. Which of the following credit terms allows a discount of 3% if payment is made within 15 days from the date of the invoice; otherwise, the total amount of the invoice must be paid within 30 days from its date? a. 3/15, EOM b. 3/EOM, n/30 c. 3/15, n/30 d. 15/3, n/30 ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 50. Merchandise inventory available at the beginning of the period plus cost of goods purchased minus merchandise inventory at the end of the period equals a. purchases. b. cost of goods sold. c. purchases returns and allowances. d. net purchases. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 51. The entry to record the purchase on account of merchandise for resale under the periodic inventory system includes a. debiting Purchases and crediting Cash. b. debiting Purchases and crediting Accounts Payable. c. debiting Merchandise Inventory and crediting Cash. d. debiting Merchandise Inventory and crediting Accounts Payable. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-16-Current Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 52. An invoice of $237.50 dated April 2 is subject to credit terms of 2/10, n/30. The amount to be paid if the invoice is paid on or before April 12 is a. $4.75. b. $23.75. c. $232.75. d. $237.50. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 53. The cost of merchandise purchased during the period less any discounts granted by suppliers and amounts returned to suppliers and amounts of any allowances made by suppliers is called a. purchases. b. net purchases. c. purchases returns and allowances. d. cost of goods sold. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 54. A form used to request the responsible person or department to purchase merchandise or other property is known as a a. purchase invoice. b. receiving report. c. purchase requisition. d. purchase order. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 55. An invoice of $237.50 dated April 2 is subject to credit terms of 2/10, n/30. If the invoice is paid on April 14, the amount to be paid would be a. $4.75. b. $23.75. c. $232.75. d. $237.50. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 56. The account to which transportation charges on incoming merchandise are generally entered is a. Freight-In. b. FOB-In. c. Freight-Out. d. Delivery-In. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 57. A record used to keep the amount owed to each supplier is called a(n) a. accounts receivable ledger. b. accounts payable ledger. c. transportation ledger. d. general ledger for accounts payable. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.46 - LO: 11-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 58. After the posting of the accounts payable ledger is completed, the total of the accounts payable ledger balances should equal the balance of which of the following general ledger accounts? a. Purchases b. Accounts Receivable c. Accounts Payable d. Purchases Returns and Allowances ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.46 - LO: 11-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 59. A list showing the amount due to each supplier as of a specified date is known as the a. schedule of accounts receivable. b. trial balance. c. balance sheet. d. schedule of accounts payable. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.48 - LO: 11-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 60. (Appendix) When the net-price method of recording purchases is used, the debit to Purchases is for the a. full amount of the invoice. b. amount of the invoice less available cash discounts. c. amount actually paid on the invoice. d. amount of the invoice plus available cash discounts. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 61. (Appendix) A purchase was made for $200 on account with credit terms of 2/10, n/30. The purchase was recorded using the net-price method. If payment is made 25 days later, the entry to record the payment will be to a. debit Accounts Payable for $200 and credit Cash for $200. b. debit Accounts Payable for $204, credit Purchases Discounts Lost for $4, and credit Cash for $200. c. debit Accounts Payable for $196, debit Purchases Discounts Lost for $4, and credit Cash for $200. d. debit Purchases for $196, debit Purchases Discounts Lost for $4, and credit Cash for $200. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 62. Using the following information, determine the (a) cost of goods sold (show your work) and (b) gross profit. Net sales Purchases Purchases returns and allowances Purchases discounts Freight-in Merchandise inventory, beginning of period Merchandise inventory, end of period ANSWER:

$198,000 92,000 1,800 1,250 1,590 63,000 37,000

Beginning inventory Purchases Purchases returns and allowances Purchases discounts Net purchases Add freight-in Cost of goods purchased Goods available for sale Less ending inventory Cost of goods sold Net sales Cost of goods sold Gross profit

$ 63,000 $92,000 $1,800 1,250

3,050 $88,950 1,590 90,540 $153,540 37,000 $116,540

$198,000 116,540 $ 81,460

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 5 min. 63. Below is a general journal page for the month of March for Wind Surfing City. Accounts Payable is account number 202 and Purchases is account number 501. Required: 1. Post the information in the general journal to the appropriate general ledger and accounts payable ledger accounts. 2. Prepare a schedule of accounts payable. GENERAL JOURNAL Post Description Ref.

Date Mar. 1 Purchases Accounts Payable/A-1 Canvas Co. 7 Purchases Cengage Learning Testing, Powered by Cognero

Page 1 Debit 3,190.00

Credit 3,190.00

6,750.00 Page 26

Chapter 11—Accounting for Purchases and Cash Payments Accounts Payable/Gone with the Wind Co.

6,750.00

10 Purchases Accounts Payable/High Seas Co.

670.00

15 Purchases Accounts Payable/Smooth Sailing Co.

3,760.00

23 Purchases Accounts Payable/Gone with the Wind Co.

145.00

25 Purchases Accounts Payable/A-1 Canvas Co.

275.00

670.00

3,760.00

145.00

275.00

GENERAL LEDGER Account Accounts Payable Date

Item

Post Ref.

Debit

Credit

Account No. 202 Balance Debit Credit

Credit

Account No. 501 Balance Debit Credit

Account Purchases Date

Item

Post Ref.

Debit

ACCOUNTS PAYABLE LEDGER Account A-1 Canvas Co. Post Date Item Ref. Debit Credit Cengage Learning Testing, Powered by Cognero

Balance Page 27

Chapter 11—Accounting for Purchases and Cash Payments

Account Gone with the Wind Co. Post Date Item Ref.

Debit

Credit

Balance

Post Ref.

Debit

Credit

Balance

Account Smooth Sailing Co. Post Date Item Ref.

Debit

Credit

Balance

Account High Seas Co. Date

Item

ANSWER: GENERAL JOURNAL Post Date Description Ref. Mar. 1 Purchases 501 202/ Accounts Payable/A-1 Canvas Co. 7 Purchases Accounts Payable/Gone with the Wind Co. 10 Purchases

Debit 3,190.00

6,750.00

202/

6,750.00

670.00

15 Purchases Accounts Payable/Smooth Sailing Co.

501 202/

3,760.00

23 Purchases

501

Accounts Payable/Gone with the Wind Co.

Credit 3,190.00

501 202/

Accounts Payable/High Seas Co.

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501

Page 1

670.00

3,760.00

202/

145.00 145.00 Page 28

Chapter 11—Accounting for Purchases and Cash Payments

25 Purchases

501

Accounts Payable/A-1 Canvas Co.

275.00

202/

275.00

Credit 3,190.00 6,750.00 670.00 3,760.00 145.00 275.00

Account No. 202 Balance Debit Credit 3,190.00 9,940.00 10,610.00 14,370.00 14,515.00 14,790.00

GENERAL LEDGER Account Accounts Payable Date Mar. 1 7 10 15 23 25

Item

Post Ref. J1 J1 J1 J1 J1 J1

Debit

Account Purchases Date Mar. 1 7 10 15 23 25

Item

Post Ref. J1 J1 J1 J1 J1 J1

Debit 3,190.00 6,750.00 670.00 3,760.00 145.00 275.00

Credit

Account No. 501 Balance Debit Credit 3,190.00 9,940.00 10,610.00 14,370.00 14,515.00 14,790.00

ACCOUNTS PAYABLE LEDGER Account A-1 Canvas Co. Post Date Item Ref. Debit Credit Mar. 1 J1 3,190.00 25 J1 275.00

Balance 3,190.00 3,465.00

Account Gone with the Wind Co. Post Date Item Ref. Mar. 7 J1 23 J1

Balance 6,750.00 6,895.00

Debit

Credit 6,750.00 145.00

Account High Seas Co. Cengage Learning Testing, Powered by Cognero

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Chapter 11—Accounting for Purchases and Cash Payments

Date Mar. 10

Item

Post Ref. J1

Account Smooth Sailing Co. Post Date Item Ref. Mar. 15 J1

Debit

Credit 670.00

Balance 670.00

Debit

Credit 3,760.00

Balance 3,760.00

Schedule of Accounts Payable A-1 Canvas Co. Gone with the Wind Co. High Seas Co. Smooth Sailing Co. Total POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.46 - LO: 11-3 COLL.HEIN.17.48 - LO: 11-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 10 min.

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$ 3,465 6,895 670 3,760 $14,790

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Chapter 11—Accounting for Purchases and Cash Payments 64. Record the following transactions as general journal entries. Use the gross-price method. Aug. 6 8 13 15 17

Purchased $830 of merchandise on account from Johnston Co. Credit terms 2/10, n/30. Bought an $18,000 truck from Pillner Co., paying $3,000 down; balance on account. Purchased $2,611 of merchandise for cash from Pillner and Co. Paid for the August 6 purchase of merchandise from Johnston Co. Purchased $1,743 of merchandise from Luis Co. Credit terms 2/10, n/30.

ANSWER: GENERAL JOURNAL Post Description Ref.

Date Aug. 6 Purchases Accounts Payable/Johnston Co.

Page 1 Debit 830.00

Credit 830.00

8 Truck Accounts Payable/Pillner Co. Cash

18,000.00

13 Purchases Cash

2,611.00

15 Accounts Payable/Johnston Co. Purchases Discounts Cash

830.00

17 Purchases Accounts Payable/Luis Co.

1,743.00

15,000.00 3,000.00

2,611.00

16.60 813.40

1,743.00

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Easy COLL.HEIN.17.45 - LO: 11-2 COLL.HEIN.17.46 - LO: 11-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 5 min. 65. The following information was taken from the accounting records of Bay Village Paving Co. for the month of January, 20--: Sales Sales Returns and Allowances Sales Discounts Purchases Purchases Returns and Allowances Cengage Learning Testing, Powered by Cognero

$857,000 1,876 627 378,000 9,560 Page 31

Chapter 11—Accounting for Purchases and Cash Payments Purchases Discounts Freight-In Merchandise Inventory, January 1 Merchandise Inventory, January 31

2,760 3,700 111,000 106,000

Complete a partial income statement for the month of January, showing gross profit. Bay Village Paving Co. Income Statement (partial) For the month ended January 31, 20-Sales Sales returns and allowances Sales discounts Net sales Cost of goods sold: Merchandise inventory, January 1 Purchases Purchases returns and allowances Purchases discounts Net purchases Freight-in Cost of goods purchased Goods available for sale Merchandise inventory, January 31 Cost of goods sold Gross profit ANSWER: Bay Village Paving Co. Income Statement (partial) For the month ended January 31, 20-Sales Sales returns and allowances Sales discounts Net sales Cost of goods sold: Merchandise inventory, January 1 Purchases Purchases returns and allowances Purchases discounts Net purchases Freight-in Cost of goods purchased Goods available for sale Merchandise inventory, January 31 Cost of goods sold Gross profit Cengage Learning Testing, Powered by Cognero

$857,000 $ 1,876 627

2,503 $854,497

$111,000 $378,000 $9,560 2,760 12,320 $365,680 3,700 369,380 $480,380 106,000 374,380 $480,117 Page 32

Chapter 11—Accounting for Purchases and Cash Payments POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 3 min. 66. The following information was taken from the accounting records of Northern Lights for the month of October, 20--: Sales Sales Returns and Allowances Sales Discounts Purchases Purchases Returns and Allowances Purchases Discounts Freight-In Merchandise Inventory, October 1 Merchandise Inventory, October 31

$344,000 3,410 370 194,500 9,740 5,560 1,580 42,000 33,000

Complete a partial income statement for the month of October, showing gross profit. Northern Lights Income Statement (partial) For the month ended October 31, 20-Sales Sales returns and allowances Sales discounts Net sales Cost of goods sold: Merchandise inventory, October 1 Purchases Purchases returns and allowances Purchases discounts Net purchases Freight-in Cost of goods purchased Goods available for sale Merchandise inventory, October 31 Cost of goods sold Gross profit ANSWER: Northern Lights Income Statement (partial) For the month ended October 31, 20-Cengage Learning Testing, Powered by Cognero

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Chapter 11—Accounting for Purchases and Cash Payments Sales Sales returns and allowances Sales discounts Net sales Cost of goods sold: Merchandise inventory, October 1 Purchases Purchases returns and allowances Purchases discounts Net purchases Freight-in Cost of goods purchased Goods available for sale Merchandise inventory, October 31 Cost of goods sold Gross profit

$344,000 $ 3,410 370

3,780 $340,220

$ 42,000 $194,500 $9,740 5,560 15,300 $179,200 1,580 180,780 $222,780 33,000 189,780 $150,440

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 3 min. 67. Tim Simpleton owns a variety store called Tiny Tim Center. Journalize the following purchases of inventory, returns, and discounts for the month of November. Use the gross-price method. Nov. 1 1 5 7 10 11 12 17 22 27

Purchased $4,000 of merchandise from Hilltop Caterers on account, Invoice 1234, with a 10% trade discount. Credit terms 2/10, n/30. Paid rent for the month of November. Issued Check 5142 for $1,400. Purchased merchandise from Owen's Supply Co. Issued Check 5143 for $1,750. Purchased $3,400 of merchandise from Seaside Co. on account, Invoice 7438. Credit terms 1/15, n/30. Returned $500 of the merchandise from Seaside Co. Received Credit Memo 131. Paid Invoice 1234 to Hilltop Caterers. Issued Check 5144 for $3,528. Purchased $4,700 of merchandise (included $200 freight) from Winding Willow Co. on account, Invoice 5139. Credit terms 3/15, n/30, FOB shipping point. Purchased $320 of office supplies from Turnkey Co. on account, Invoice 8320. Credit terms 2/10, n/30. Paid Invoice 7438 to Seaside Co. Issued Check 5145 for $2,871. Paid Invoice 5139 to Winding Willow Co. Issued Check 5146 for $4,565.

ANSWER: GENERAL JOURNAL Date Cengage Learning Testing, Powered by Cognero

Description

Page 1 Post Ref.

Debit

Credit Page 34

Chapter 11—Accounting for Purchases and Cash Payments

GENERAL JOURNAL Date Description Nov. 1 Purchases Accounts Payable/Hilltop Caterers

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Page 1 Post Ref.

Debit 3,600.00

Credit 3,600.00

1 Rent Expense Cash

1,400.00

5 Purchases Cash

1,750.00

1,400.00

1,750.00

Page 35

Chapter 11—Accounting for Purchases and Cash Payments 7 Purchases Accounts Payable/Seaside Co

3,400.00 .

3,400.00

10 Accounts Payable/Seaside Co. Purchases Returns and Allowances

500.00

11 Accounts Payable/Hilltop Caterers Purchases Discounts Cash

3,600.00

12 Purchases Freight-In Accounts Payable/Winding Willow Co.

4,500.00 200.00

17 Office Supplies Accounts Payable/Turnkey Co.

320.00

22 Accounts Payable/Seaside Co Purchases Discounts Cash 27 Accounts Payable/Winding Willow Co. Purchases Discounts Cash

500.00

72.00 3,528.00

4,700.00

320.00 .

2,900.00 29.00 2,871.00 4,700.00 135.00 4,565.00

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Challenging COLL.HEIN.17.45 - LO: 11-2 COLL.HEIN.17.46 - LO: 11-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 10 min.

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Chapter 11—Accounting for Purchases and Cash Payments 68. Record the following transactions for Red Wood Trails in a general journal. June 3 9 12 13 19

Purchased $3,985 of merchandise on account from JVC Co. Purchased $2,300 of merchandise on account from Prime Target and Co. Credit terms 2/10, n/30. Purchased $675 of store supplies on account from Craft Shop. Paid for June 3 purchase of merchandise from JVC Co. Paid for June 9 purchase of merchandise from Prime Target and Co.

ANSWER: GENERAL JOURNAL Date Description June 3 Purchases Accounts Payable/JVC Co.

Page 1 Post Ref.

Debit 3,985.00

3,985.00

9 Purchases Accounts Payable/Prime Target and Co.

2,300.00

12 Store Supplies Accounts Payable/Craft Shop

675.00

13 Accounts Payable/JVC Co. Cash

3,985.00

Accounts Payable/Prime Target and Co. Purchases Discounts Cash

Credit

2,300.00

675.00

3,985.00

2,300.00 46.00 2,254.00

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Chapter 11—Accounting for Purchases and Cash Payments 69. A(n) ____________________ is a reduction from the list or catalog price offered to different classes of customers. ANSWER: trade discount POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 70. Net sales minus cost of goods sold equals ____________________. ANSWER:

gross profit gross margin POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 71. A form used to request the purchase of merchandise or other property is a(n) ____________________. ANSWER: purchase requisition POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 72. When the transportation charges are paid by the seller, merchandise is shipped ____________________. ANSWER: FOB destination POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 73. ____________________ tells management the amount of sales dollars available to cover expenses after covering the cost of goods sold. ANSWER: Gross profit POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 74. A summary accounts payable account called a(n) ____________________ is maintained in the general ledger. ANSWER: controlling account POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.46 - LO: 11-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 11—Accounting for Purchases and Cash Payments 75. The ____________________ is an alphabetic or numeric listing of supplier accounts and balances, usually prepared at the end of the month. ANSWER: schedule of accounts payable POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.48 - LO: 11-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 76. A(n) ____________________ is a separate ledger containing an individual account for each supplier. ANSWER: accounts payable ledger POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.46 - LO: 11-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 77. Goods available for sale minus ending inventory equals ____________________. ANSWER: cost of goods sold POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 40

Chapter 11—Accounting for Purchases and Cash Payments 78. When merchandise is shipped ____________________, the freight costs are paid by the buyer. ANSWER: FOB shipping point POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.45 - LO: 11-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 79. ____________________ is an account used to record transportation charges on merchandise purchases. ANSWER: Freight-In POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 80. Merchandise acquired for resale to customers requires a debit to ____________________. ANSWER: Purchases POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.44 - LO: 11-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. accounts payable ledger b. cost of goods sold c. FOB destination d. FOB shipping point e. gross profit f. purchase invoice g. purchase order h. purchase requisition Cengage Learning Testing, Powered by Cognero

Page 41

Chapter 11—Accounting for Purchases and Cash Payments i. purchases j. receiving report k. schedule of accounts payable l. trade discount DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.44 - LO: 11-1 COLL.HEIN.17.45 - LO: 11-2 COLL.HEIN.17.46 - LO: 11-3 COLL.HEIN.17.48 - LO: 11-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 81. A report indicating what has been received. ANSWER: j POINTS: 1 82. A written order to buy goods from a specific vendor (supplier). ANSWER: g POINTS: 1 83. A document prepared by the seller as a bill for the merchandise shipped. ANSWER: f POINTS: 1 84. A reduction from the list or catalog price offered to different classes of customers. ANSWER: l POINTS: 1 85. A form used to request the purchase of merchandise or other property. ANSWER: h POINTS: 1 86. The difference between net sales and cost of goods sold. ANSWER: e POINTS: 1 87. An alphabetical or numerical listing of supplier accounts and balances, usually prepared at the end of the month. ANSWER: k POINTS: 1

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Chapter 11—Accounting for Purchases and Cash Payments 88. The difference between the goods available for sale and the ending inventory. ANSWER: b POINTS: 1 89. A separate ledger containing an individual account payable for each supplier. ANSWER: a POINTS: 1 90. Transportation charges are paid by the buyer. ANSWER: d POINTS: 1 91. Transportation charges are paid by the seller. ANSWER: c POINTS: 1 92. Merchandise acquired for resale to customers. ANSWER: i POINTS: 1

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Chapter 12—Special Journals 1. The types of special journals a business uses should depend on the types of transactions that occur most frequently for a business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.49 - LO: 12-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. Transactions that are similar in type and recorded frequently are likely to have a special journal. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.49 - LO: 12-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. Each special journal allows for specific transactions. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.49 - LO: 12-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 1

Chapter 12—Special Journals 4. Most transactions entered in a special journal use a single line, with the debit and credit amounts indicated in special columns provided for each account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.49 - LO: 12-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. Special journals enable a substantial time savings and make for a more efficient posting process. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.49 - LO: 12-1 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. A journal designed for entering only purchases on account is called an accounts receivable journal. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA BB-Industry BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals 7. There is no need to total columns in the sales journal. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. Posting from the sales journal to the general ledger accounts requires only one posting per account each period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. "S14" in the Posting Reference column of a general ledger account would indicate that amount came from the sales journal on the 14th of the month. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals 10. A common approach to keeping a record of each customer's accounts receivable is to use a subsidiary accounts receivable ledger. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. When a business uses a subsidiary accounts receivable ledger, there is no need to keep a summary accounts receivable account in the general ledger. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. After the posting of the accounts receivable ledger and the general ledger is completed, the total of the accounts receivable ledger balances should equal the Accounts Receivable balance in the general ledger. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 12—Special Journals 13. The accounts receivable ledger is simply a detailed listing of the same information that is summarized in the accounts receivable account in the general ledger. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. The sales journal can be used to enter any kind of sales, including cash sales and sales on account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. It is inefficient to record all cash payments in a general journal. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.51 - LO: 12-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals 16. The use of bank credit cards in connection with retail sales is not a common practice. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.51 - LO: 12-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. For the merchant, bank credit card sales are nothing like cash sales. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.51 - LO: 12-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. A journal designed for entering only cash receipts is called a cash receipts journal. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.51 - LO: 12-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals 19. If a business uses special journals, it does NOT need to have a general journal. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.49 - LO: 12-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. The cash receipts journal is posted to the general ledger in two stages. First, the individual amounts in the General Credit column are posted and then the total of the other amounts columns are posted. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.51 - LO: 12-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. When posting the cash receipts journal to the general ledger, insert the date in the Date column and your initials in the Posting Reference column of each ledger account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.51 - LO: 12-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals 22. It is important to post every column total from the cash receipts journal to the general ledger. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.51 - LO: 12-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. A purchases journal is a special journal used to record purchases of merchandise for cash and on account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.52 - LO: 12-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. Each general ledger account used in the purchases journal requires only one posting for each accounting period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.52 - LO: 12-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals 25. After the posting of the accounts payable ledger and general ledger is completed, the total of the accounts payable ledger balances should equal the Accounts Payable balance in the general ledger. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.52 - LO: 12-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. If a buyer is given an allowance for damaged merchandise, an entry is required in the general journal. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. An account number in the Posting Reference column of the general journal indicates that the amount has been posted to the account in the general ledger. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.52 - LO: 12-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals 28. It is an acceptable business practice to post the accounts receivable ledger daily and the general ledger monthly. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.52 - LO: 12-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. A recommended accounting practice in order to eliminate a General Debit column in the cash payments journal is to provide separate columns for special groups of entries such as Accounts Payable, Purchases, Purchases Discounts, and Cash. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.53 - LO: 12-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. Purchases Returns and Allowances are recorded in the purchases journal. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.52 - LO: 12-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals 31. Individual amounts for purchases returns and allowances are recorded in the General Debit column of the cash payments journal. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.53 - LO: 12-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. Each amount in the General Debit column of the cash payments journal should be posted daily. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.53 - LO: 12-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. Posting to the accounts payable ledger should be made at the end of the month. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.52 - LO: 12-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals 34. The total of the General Debit Column of the Cash Payments Journal should be posted to the general ledger at the end of each month. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.53 - LO: 12-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. A journal designed for entering only sales on account is called the a. cash receipts journal. b. cash payments journal. c. sales journal. d. general journal. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals 36. A journal that is not used by a business is a a. sales journal. b. purchase journal. c. cash flow journal. d. cash receipts journal. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 37. Summary posting from the sales journal normally would be completed in which of the following orders? a. Accounts Receivable, Sales, and Sales Tax Payable columns b. Sales Tax Payable, Sales, and Accounts Receivable columns c. Sales, Sales Tax Payable, and Accounts Receivable columns d. Accounts Receivable, Sales Tax Payable, and Sales columns ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals 38. A common approach to keeping a record of each customer's accounts receivable is to use a(n) a. sales journal. b. accounts receivable ledger. c. general ledger. d. controlling account. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 39. After posting is completed in the accounts receivable ledger and the general ledger, the total of the accounts receivable ledger balances should equal the a. accounts payable account balance. b. accounts receivable account balance. c. cash account balance. d. net income amount. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals 40. Which of the following is NOT true about posting the cash receipts journal information at the end of the month? a. Total the amount columns, prove the total of debits equal to credits, and rule the columns. b. Post the individual amounts from the General Credit column to the appropriate general ledger accounts. c. Post each column total except the General Credit column total to the general ledger accounts. d. Insert the date in the Date column and "CR" and the page number in the Posting Reference column of each ledger account. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 41. With a special journal, summary postings of column totals are made to appropriate accounts a. monthly. b. daily. c. yearly. d. on a periodic basis. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.49 - LO: 12-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals 42. A journal designed for entering only cash receipts is called the a. cash receipts journal. b. sales journal. c. cash payments journal. d. general journal. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.51 - LO: 12-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 43. For the merchant, bank credit card sales are treated in a manner similar to a. accounts receivable. b. cash sales. c. installment sales. d. layaway sales. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.51 - LO: 12-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals 44. A record used to keep the amount owed to each supplier is called a(n) a. accounts receivable ledger. b. accounts payable ledger. c. cash payments journal. d. general ledger for accounts payable. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.52 - LO: 12-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 45. After the posting of the accounts payable ledger and general ledger is completed, the total of the accounts payable ledger balances should equal the general ledger balance of a. Purchases. b. Accounts Receivable. c. Accounts Payable. d. Purchases Returns and Allowances. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.52 - LO: 12-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals 46. When purchasing merchandise for resale on account, record the transaction in the a. sales journal. b. cash receipts journal. c. cash payments journal. d. purchases journal. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.52 - LO: 12-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 47. When purchasing merchandise for resale for cash, record the transaction in the a. sales journal. b. cash receipts journal. c. cash payments journal. d. purchases journal. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.53 - LO: 12-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals 48. Purchases returns and allowances are recorded in the a. merchandise journal. b. general journal. c. purchases journal. d. accounts payable journal. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.52 - LO: 12-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 49. Every entry in the cash payments journal includes all of the following EXCEPT a. the number of the check issued. b. the name of the supplier or other accounts debited. c. the amount of the cash payment entered in the Cash Credit column. d. the amount of the cash payment entered in the Cash Debit column. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.53 - LO: 12-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals 50. A list showing the amount due to each supplier as of a specified date is known as the a. schedule of accounts receivable. b. trial balance. c. balance sheet. d. schedule of accounts payable. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.52 - LO: 12-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 51. A cash payments journal is a special journal used to record all of the following EXCEPT a. a payment of an expense by check. b. a cash purchase of supplies. c. a cash withdrawal by the owner. d. an asset accepted as payment by a supplier. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.53 - LO: 12-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 52. Enter the following transactions in either the sales journal or the general journal, as appropriate. Use a 6% sales tax rate. Total and rule the sales journal. Jan. 3 7 14 19 29

Sold merchandise on account to J. J. Johnson, $1,500, plus sales tax. Sold merchandise on account to C. Lopez, $2,100, plus sales tax. Issued credit memorandum to J. J. Johnson for $530, including sales tax of $30. Sold merchandise on account to H. Hertz, $700, plus sales tax. Sold merchandise on account to G. Cardolo, $1,100, plus sales tax. SALES JOURNAL

Date

Sale No.

To Whom Sold

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Accounts Post. Receivable Ref. Debit

Sales Credit

Page 1 Sales Tax Payable Credit Page 20

Chapter 12—Special Journals

Date

GENERAL JOURNAL Post Description Ref.

Page 1 Debit

Credit

ANSWER: SALES JOURNAL

Page 1

Accounts Post. Receivable Ref. Debit 1,590.00 2,226.00 742.00 1,166.00 5,724.00

Sales Tax Sales Payable Credit Credit 1,500.00 90.00 2,100.00 126.00 700.00 42.00 1,100.00 66.00 5,400.00 324.00

GENERAL JOURNAL Post Date Description Ref. Jan. 14 Sales Returns and Allowances Sales Tax Payable Accounts Receivable/J. J. Johnson

Page 1

Sale Date No. To Whom Sold Jan. 3 J. J. Johnson 7 C. Lopez 19 H. Hertz 29 G. Cardolo

Debit 500.00 30.00

Credit

530.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 5 min. 53. Enter the following transactions in a cash receipts journal. Use a 5% sales tax rate. Total and rule the journal. Oct. 1 8 10

Jim White made a $600 payment on account. Cash sales for the week, $3,000, plus sales tax. Kristin Ludwin made a $600 payment on account.

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Chapter 12—Special Journals 15 17 25 30

Melissa Perez made a $3,570 payment on account. Cash sales for the week, $2,600, plus sales tax. Sue Lee paid $860 on account. Matt Chang paid $934 on account. CASH RECEIPTS JOURNAL

Date

Account Credited

Sales Accounts Tax Post General Receivable Sales Payable Credit Ref. Credit Credit Credit

Page 1

Cash Debit

ANSWER: CASH RECEIPTS JOURNAL

Page 1

Sales Accounts Tax Sales Account Post General Receivable Payable Cash Credit Credit Debit Date Credited Ref. Credit Credit Oct. 1 Jim White 600.00 600.00 8 Cash sales 3,000.00 150.00 3,150.00 10 Kristin Ludwin 600.00 600.00 15 Melissa 3,570.00 Perez 3,570.00 Cash sales 2,600.00 130.00 2,730.00 25 Sue Lee 860.00 860.00 30 Matt Chang 934.00________ ______ 934.00 6,564.00 5,600.00 280.00 12,444.00 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.51 - LO: 12-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 5 min. 54. The purchases journal for Trail Blazers for the month of April is presented below. Accounts Payable is account Cengage Learning Testing, Powered by Cognero

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Chapter 12—Special Journals number 202 and Purchases is account number 501. Required: 1. Post the information in the purchases journal to the appropriate general ledger and accounts payable ledger accounts. 2. Prepare a schedule of accounts payable. PURCHASES JOURNAL

Page

Invoice No.

Date Apr.

2 4 8 9 10 15

1122 1123 1124 1125 1126 1127

Post Ref.

From Whom Purchased Longo Co. Middle County Suppliers Pueblo Crafts Highlander Co. Pearl Art Supply Middle County Suppliers

Purchases Debit/ Accounts Payable Credit 4,851.00 4,675.00 2,970.00 3,528.00 1,530.00 1,100.00

GENERAL LEDGER Account Accounts Payable Date

Item

Post Ref.

Debit

Credit

Account No. 202 Balance Debit Credit

Credit

Account No. 501 Balance Debit Credit

Account Purchases Date

Item

Post Ref.

Debit

ACCOUNTS PAYABLE LEDGER Account Highlander Co. Post Date Item Ref. Debit Credit

Balance

Account Longo Co. Date

Item

Post Ref.

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Debit

Credit

Balance

Page 23

Chapter 12—Special Journals Account Middle County Suppliers Post Date Item Ref.

Debit

Credit

Balance

Post Ref.

Debit

Credit

Balance

Post Ref.

Debit

Credit

Balance

Account Pearl Art Supply Date

Item

Account Pueblo Crafts Date

Item

ANSWER: PURCHASES JOURNAL

Date Apr.

2 4 8 9 10 15

Invoice From Whom No. Purchased 1122 Longo Co. Middle County 1123 Suppliers 1124 Pueblo Crafts 1125 Highlander Co. 1126 Pearl Art Supply Middle County 1127 Suppliers

Post Ref.

Page 6 Purchases Debit/ Accounts Payable Credit 4,851.00 4,675.00 2,970.00 3,528.00 1,530.00 1,100.00 18,654.00 (501) (202)

GENERAL LEDGER Account Accounts Payable Post Date Item Ref. Apr. 30 P6

Debit

Credit 18,654.00

Account Purchases Date Cengage Learning Testing, Powered by Cognero

Item

Post Ref.

Debit

Credit

Account No. 202 Balance Debit Credit 18,654.00

Account No. 501 Balance Debit Credit Page 24

Chapter 12—Special Journals Apr.

18,654.00

ACCOUNTS PAYABLE LEDGER Account Highlander Co. Post Date Item Ref. Debit Credit Apr. 9 P6 3,528.00

Balance 3,528.00

Account Longo Co. Date Apr. 2

Item

Post Ref. P6

Debit

Credit 4,851.00

Balance 4,851.00

Debit

Balance Credit 4,675.00 4,675.00 1,100.00 5,775.00

Post Ref. P6

Debit

Credit 1,530.00

Balance 1,530.00

Post Ref. P6

Debit

Credit 2,970.00

Balance 2,970.00

Account Middle County Suppliers Date Apr. 4 15

Item

Post Ref. P6 P6

Account Pearl Art Supply Date Apr. 10

Item

Account Pueblo Crafts Date Apr. 8

Item

Schedule of Accounts Payable Highlander Co. Longo Co. Middle Country Suppliers Pearl Art Supply Pueblo Crafts

$ 3,528 4,851 5,775 1,530 2,970 $18,654

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.52 - LO: 12-4 ACCREDITING STANDARDS: AICPA FN-Measurement Cengage Learning Testing, Powered by Cognero

Page 25

Chapter 12—Special Journals

TOPICS: KEYWORDS: NOTES:

BUSPROG: Analytic ACBSP: APC-18-Special Journals Bloom's: Remembering 10 min.

55. Derek Dempsey owns a retail furniture store. The books include a cash payments journal and an accounts payable ledger. All cash payments (except petty cash) are entered in the cash payments journal. Selected account balances as of July 1 are as follows: General Ledger Cash Accounts Payable

$38,000 18,000

Accounts Payable Ledger Middle Town Co. Montauk Unlimited Rolling Hills & Co. Sunrise Inc.

$ 2,800 1,800 10,200 3,200

The following are transactions related to cash payments during the month of July: July 1 2 7 11 14 18 23 31

Issued Check No. 536 in payment of July rent (Rent Expense), $2,500. Issued Check No. 537 to Montauk Unlimited in payment of merchandise purchased on account $1,800, less a 2% cash discount. Check was written for $1,764. Issued Check No. 538 to Rolling Hills & Co. in partial payment for merchandise purchased on account, $4,200. A cash discount was not allowed. Issued Check No. 539 to Middle Town Co. for merchandise purchased on account $2,800, less a 1% discount. Check was written for $2,772. Issued Check No. 540 to City Power and Light (Utilities Expense), $1,230. Issued Check No. 541 to Oak Warehouse for a cash purchase of merchandise, $4,260. Issued Check No. 542 to Sunrise Inc. for merchandise purchased on account, $3,200, less a 3% cash discount. Check was written for $3,104. Issued Check No. 543 to Central Freight Lines for freight charges on merchandise purchased (Freight-In), $920.

Required: 1. Enter the transactions in a cash payments journal. Total, rule, and prove the cash payments journal. 2. Post from the cash payments journal to the general ledger and the accounts payable ledger.

Date

Check No.

CASH PAYMENTS JOURNAL Page 4 Account Post. General Accounts Purchases > Debited Ref. Debit Payable Debit Debit > > > > > > > >

Cengage Learning Testing, Powered by Cognero

Page 26

Chapter 12—Special Journals > >

Purchases Discounts Credit

Cash Credit

< < < < < < < < < <

GENERAL LEDGER Account Cash Date

Item

Post Ref.

Debit

Credit

Account No. 101 Balance Debit Credit

Credit

Account No. 202 Balance Debit Credit

Credit

Account No. 501 Balance Debit Credit

Credit

Account No. 501.2 Balance Debit Credit

Account Accounts Payable Date

Item

Post Ref.

Debit

Account Purchases Date

Item

Post Ref.

Account Purchases Discounts Post Date Item Ref.

Account Freight-In Post Cengage Learning Testing, Powered by Cognero

Debit

Account No. 502 Balance Page 27

Chapter 12—Special Journals Date

Item

Ref.

Debit

Credit

Debit

Credit

Account No. 521 Balance Debit Credit

Credit

Account No. 541 Balance Debit Credit

Account Rent Expense Date

Item

Post Ref.

Debit

Account Utilities Expense Date

Item

Post Ref.

Debit

Credit

ACCOUNTS PAYABLE LEDGER Account Middle Town Co. Post Date Item Ref. Debit Credit

Balance

Account Montauk Unlimited Post Date Item Ref.

Debit

Credit

Balance

Account Rolling Hills & Co. Post Date Item Ref.

Debit

Credit

Balance

Debit

Credit

Balance

Account Sunrise Inc. Date

Item

Post Ref.

ANSWER: CASH PAYMENTS JOURNAL Accounts Cengage Learning Testing, Powered by Cognero

Page 4 Page 28

Chapter 12—Special Journals Check Post. General Payable Purchases No. Account Debited Ref. Debit Debit Date Debit July 1 536 Rent Expense 521 2,500.00 2 537 Montauk Unlimited 1,800.00 7 538 Rolling Hills & Co. 4,200.00 11 539 Middle Town Co. 2,800.00 14 540 Utilities Expense 541 1,230.00 18 541 Oak Warehouse 4,260.00 23 542 Sunrise Inc. 3,200.00 31 543 Freight-In 502 920.00 _________ ________ 4,650.00 12,000.00 4,260.00 ( )

Purchases Discounts Credit

< < < < < < < < < <

36.00 28.00

96.00 ______ 160.00 (501.2)

(202)

(501)

Cash Credit 2,500.00 1,764.00 4,200.00 2,772.00 1,230.00 4,260.00 3,104.00 920.00 20,750.00 (101)

GENERAL LEDGER Account Cash Date Item July 1 Balance 31

Post Ref.

Debit

CP4

Credit 20,750.00

Account Accounts Payable Date Item July 1 Balance 31

CP4 12,000.00

Account No. 202 Balance Debit Credit 18,000.00 6,000.00

Post Ref.

Account No. 501 Balance Debit Credit

Post Ref.

Debit

Credit

Account Purchases Date Cengage Learning Testing, Powered by Cognero

Item

Account No. 101 Balance Debit Credit 38,000.00 17,250.00

Debit

Credit

Page 29

Chapter 12—Special Journals July

CP4

Account Purchases Discounts Post Date Item Ref. July 31 CP4

4,260.00

Debit

4,260.00

Credit 160.00

Account Freight-In Date July 31

Item

Post Ref. CP4

Debit 920.00

Credit

Account Rent Expense Date July 1

Item

Post Ref. CP4

Debit 2,500.00

Credit

Account Utilities Expense Date July 14

Item

Post Ref. CP4

Debit 1,230.00

Credit

Account No. 501.2 Balance Debit Credit 160.00

Account No. 502 Balance Debit Credit 920.00

Account No. 521 Balance Debit Credit 2,500.00

Account No. 541 Balance Debit Credit 1,230.00

ACCOUNTS PAYABLE LEDGER Account Middle Town Co. Post Date Item Ref. Debit Credit July 1 Balance 11 CP4 2,800.00

Balance 2,800.00 0.00

Account Montauk Unlimited Post Date Item Ref. July 1 Balance 2 CP4

Debit

Credit

Balance 1,800.00 0.00

Account Rolling Hills & Co. Post Date Item Ref. July 1 Balance 7 CP4

Debit

Credit

Balance 10,200.00 6,000.00

Cengage Learning Testing, Powered by Cognero

1,800.00

4,200.00

Page 30

Chapter 12—Special Journals

Account Sunrise Inc. Date Item July 1 Balance 11

Post Ref. CP4

Debit

Credit

3,200.00

Balance 3,200.00 0.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.53 - LO: 12-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 25 min. 56. Ray Polo owns a variety store called Stars Forever. The following are purchases of inventory, returns, and discounts for the month of March. Mar.

Purchased $2,000 of merchandise from Sundance Furniture on account, Invoice 2177, with a 1% trade discount. Credit terms 2/10, n/30. 2 Paid rent for the month of March. Issued Check 145 for $2,100. 6 Purchased merchandise from Taylor Supplies. Issued Check 146 for $1,650. 8 Purchased $2,400 of merchandise from Fuentes Co. on account, Invoice 2178. Credit terms 1/15, n/30. 11 Returned $400 of the merchandise from Fuentes Co. Received Credit Memorandum 11. 12 Paid Invoice 2177 to Sundance Furniture. Issued Check 147 for $1,940.40. 13 Purchased $3,700 of merchandise (included $150 freight) from Sky Divers Inc. on account, Invoice 2179. Credit terms 1/10, n/30, FOB shipping point. 16 Purchased $210 of office supplies from Willow Inc. on account, Invoice 2180. Credit terms 2/10, n/30. 23 Paid Invoice 2178 to Fuentes Co. Issued Check 148 for $1,980. 26 Paid Invoice 2179 to Sky Divers Inc. Issued Check 149 for $3,700. 27 Purchased $1,745 of merchandise from Sundance Furniture on account, Invoice 2181. Credit terms 2/10, n/30. A partial chart of accounts is as follows (assume Cash has an existing balance of $20,000): 101 142 202 501 501.1 501.2 502 521

Cash Office Supplies Accounts Payable Purchases Purchases Returns and Allowances Purchases Discounts Freight-In Rent Expense

Required: Cengage Learning Testing, Powered by Cognero

Page 31

Chapter 12—Special Journals 1. 2. 3.

Journalize the above transactions. Post to the proper general ledger and accounts payable ledger accounts. Remember to use posting references. Prepare a schedule of accounts payable. PURCHASES JOURNAL Invoice No.

Date

From Whom Purchased

Page 6 Purchases Debit/ Post Accounts Payable Ref. Credit

CASH PAYMENTS JOURNAL Check No.

Date

Account Debited

Purchases Discounts Credit

Page 4

Post. General Accounts Purchases > Ref. Debit Payable Debit Debit > > > > > > > Cash Credit

< < < < < < < GENERAL JOURNAL Date

Description

Cengage Learning Testing, Powered by Cognero

Page 1 Post Ref.

Debit

Credit

Page 32

Chapter 12—Special Journals

GENERAL LEDGER Account Cash Date Mar. 1

Item Balance

Post Ref.

Debit

Credit

Account Office Supplies Date

Item

Post Ref.

Debit

Credit

Account No. 142 Balance Debit Credit

Credit

Account No. 202 Balance Debit Credit

Credit

Account No. 501 Balance Debit Credit

Credit

Account No. 501.1 Balance Debit Credit

Credit

Account No. 501.2 Balance Debit Credit

Account Accounts Payable Date

Item

Post Ref.

Debit

Account Purchases Date

Item

Post Ref.

Debit

Account Purchases Returns and Allowances Post Date Item Ref. Debit

Account Purchases Discounts Post Date Item Ref.

Cengage Learning Testing, Powered by Cognero

Debit

Account No. 101 Balance Debit Credit 20,000.00

Page 33

Chapter 12—Special Journals Account Freight-In Date

Item

Post Ref.

Debit

Credit

Account No. 502 Balance Debit Credit

Credit

Account No. 521 Balance Debit Credit

Account Rent Expense Date

Item

Post Ref.

Debit

ACCOUNTS PAYABLE LEDGER Account Fuentes Co. Post Date Item Ref. Debit Credit

Balance

Account Sky Divers Inc. Post Ref.

Debit

Credit

Balance

Account Sundance Furniture Post Date Item Ref.

Debit

Credit

Balance

Debit

Credit

Balance

Date

Item

Account Willow Inc. Date

Item

Post Ref.

ANSWER: PURCHASES JOURNAL

Date Cengage Learning Testing, Powered by Cognero

Invoice No.

From Whom Purchased

Page 6 Purchases Debit/ Post Accounts Payable Ref. Credit Page 34

Chapter 12—Special Journals Mar.

2 8 13 27

2177 2178 2179 2181

Sundance Furniture Fuentes Co. Sky Divers Inc. Sundance Furniture

1,980.00 2,400.00 3,550.00 1,745.00 9,675.00 (501) (202)

Date Mar. 2 6 12 23 26

CASH PAYMENTS JOURNAL Page 4 Accounts Post. General Payable Purchases Account Debited Ref. Debit Debit Debit Rent Expense 521 2,100.00 Taylor Supplies 1,650.00 Sundance Furniture 1,980.00 Fuentes Co. 2,000.00 Sky Divers Inc ________ 3,700.00 ________ 2,100.00 7,680.00 1,650.00

Check No. 145 146 147 148 149

( )

< < < < < < < <

Purchases Discounts Credit

39.60 20.00 _____ 59.60

Cash Credit 2,100.00 1,650.00 1,940.40 1,980.00 3,700.00 11,370.40

(501.2)

(101)

(202)

GENERAL JOURNAL Post Date Description Ref. 202/ Mar. 11 Accounts Payable/Fuentes Co. Purchases Returns and Allowances 13 Freight-In Accounts Payable/Sky Divers Inc. Cengage Learning Testing, Powered by Cognero

Page 1 Debit 400.00

501.1 502

(501)

Credit

400.00 150.00 150.00

202/ Page 35

Chapter 12—Special Journals 16 Office Supplies

142 202/

Accounts Payable/Willow Inc.

210.00 210.00

GENERAL LEDGER Account Cash Date Item Mar. 1 Balance 31

Post Ref.

Debit

CP4

Credit 11,370.40

Account Office Supplies Date Mar. 16

Item

Post Ref. J1

Debit 210.00

Credit

Account Accounts Payable Date Mar. 11 13 16 31 31

Item

Post Ref. J1 J1 J1 P6 CP4

Date Mar. 31 31

Item

7,680.00

Debit 9,675.00 1,650.00

Account No. 501 Balance Debit Credit 9,675.00 11,325.00

Debit 400.00

Credit 150.00 210.00 9,675.00

Account Purchases Returns and Allowances Post Date Item Ref. Debit Mar. 11 J1

Account Purchases Discounts Post Date Item Ref. Mar. 31 CP4 Cengage Learning Testing, Powered by Cognero

Account No. 142 Balance Debit Credit 210.00

Account No. 202 Balance Debit Credit 400.00 250.00 40.00 9,635.00 1,955.00

Account Purchases Post Ref. P6 CP4

Account No. 101 Balance Debit Credit 20,000.00 8,629.60

Debit

Credit

Credit 400.00

Account No. 501.1 Balance Debit Credit 400.00

Credit 59.60

Account No. 501.2 Balance Debit Credit 59.60 Page 36

Chapter 12—Special Journals

Account Freight-In Date Mar. 13

Item

Post Ref. J1

Debit 150.00

Credit

Account Rent Expense Date Mar. 2

Item

Post Ref. CP4

Debit 2,100.00

Credit

Account No. 502 Balance Debit Credit 150.00

Account No. 521 Balance Debit Credit 2,100.00

ACCOUNTS PAYABLE LEDGER Account Fuentes Co. Post Date Item Ref. Debit Credit Mar. 8 P6 2,400.00 11 J1 400.00 23 CP4 2,000.00

Balance 2,400.00 2,000.00 0.00

Account Sky Divers Inc. Date Mar. 13 13 26

Item

Post Ref. P6 J1 CP4

Account Sundance Furniture Post Date Item Ref. Mar. 2 P6 12 CP4 27 P6

Debit

Credit 3,550.00 150.00

Balance 3,550.00 3,700.00 0.00

Credit 1,980.00 1,745.00

Balance 1,980.00 0.00 1,745.00

Credit 210.00

Balance 210.00

3,700.00

Debit 1,980.00

Account Willow Inc. Date Mar. 16

Item

Post Ref. J1

Debit

POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.53 - LO: 12-5 ACCREDITING STANDARDS: AICPA FN-Measurement Cengage Learning Testing, Powered by Cognero

Page 37

Chapter 12—Special Journals BUSPROG: Analytic ACBSP: APC-18-Special Journals Bloom's: Remembering 40 min.

TOPICS: KEYWORDS: NOTES:

57. Enter the following transactions in either the sales journal or the general journal, as appropriate. Use a 7% sales tax rate. Total and rule the sales journal. Aug. 1 5 11 22 25

Sold merchandise on account to Beth Deleo, $1,500, plus sales tax. Sold merchandise on account to Bill Serrato, $1,850, plus sales tax. Issued credit memorandum to Beth Deleo for $428, including sales tax of $28. Sold merchandise on account to Donna Whitten, $680, plus sales tax. Sold merchandise on account to Rob Thompson, $750, plus sales tax. SALES JOURNAL

Page

Date

Sale No.

Accounts Post. Receivable To Whom Sold Ref. Debit

GENERAL JOURNAL Post Description Ref.

Sales Credit

Sales Tax Payable Credit

Page 1 Debit

Credit

ANSWER: SALES JOURNAL

Date Aug. 1 5 22 25

Sale No.

To Whom Sold Beth Deleo Bill Serrato Donna Whitten Rob Thompson

Page 1

Sales Tax Accounts Post. Receivable Sales Payable Ref. Debit Credit Credit 1,605.00 1,500.00 105.00 1,979.50 1,850.00 129.50 727.60 680.00 47.60 802.50 750.00 52.50 5,114.60 4,780.00 334.60

GENERAL JOURNAL

Page 1 Post

Cengage Learning Testing, Powered by Cognero

Page 38

Chapter 12—Special Journals Date Description Aug. 11 Sales Returns and Allowances Sales Tax Payable Accounts Receivable/Beth Deleo

Ref. Debit Credit 400.00 28.00 428.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 5 min. 58. Enter the following transactions in a cash receipts journal. Use a 5% sales tax rate. Total and rule the journal. Feb. 2 7 11 14 18 24 28

Date

John Door made an $890 payment on account. Cash sales for the week, $2,140, plus sales tax. Tom Chovin made a $600 payment on account. Grace Borsetti made a $1,540 payment on account. Cash sales for the week, $2,300, plus sales tax. Peter Chan paid $540 on account. Jean Amore paid $350 on account.

Account Credited

CASH RECEIPTS JOURNAL

Page 1

Sales Accounts Tax Post General Receivable Sales Payable Credit Ref. Credit Credit Credit

Cash Debit

ANSWER: CASH RECEIPTS JOURNAL

Page 1

Sales Accounts Tax Account Post General Receivable Sales Payable Cash Credit Credit Debit Date Credited Ref. Credit Credit Feb. 2 John Door 890.00 890.00 7 Cash sales 2,140.00 107.00 2,247.00 11 Tom Chovin 600.00 600.00 Cengage Learning Testing, Powered by Cognero

Page 39

Chapter 12—Special Journals 14 Grace Borsetti 18 Cash sales 24 Peter Chan 28 Jean Amore

1,540.00

2,300.00 115.00 2,415.00 540.00 540.00 350.00________ ______ 350.00 3,920.00 4,440.00 222.00 8,582.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.51 - LO: 12-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 5 min. 59. Harry O'Brien operates Leather Warehouse, a leather shop that sells luggage, handbags, business cases, and other leather goods. During the month of May, the following transactions took place. The applicable sales tax rate is 6%. May 2 9 12 18 19 22 26

Sold merchandise on account to James Koffsky, $250.00, plus sales tax. Sold merchandise on account to Kevin Nolon, $470.00, plus sales tax. James Koffsky returned $40.00 worth of merchandise purchased on May 2 for credit. Sold merchandise on account to Joyce McKay, $110.00, plus sales tax. Sold merchandise on account to Tim Carney, $165.00, plus sales tax. Received payment from James Koffsky on account. Joyce McKay was given an allowance of $30.00 when she reported damage in the merchandise purchased May 18. Sold merchandise on account to James Koffsky, $500.00, plus sales tax. Sold merchandise on account to Kevin Nolon, $230.00, plus sales tax. Received payment from Joyce McKay on account. Cash sales for the month were $2,600, plus sales tax.

28 29 31 31 Required: 1. Enter the above transactions in the appropriate journal. 2. Post the entries from the journals to the subsidiary ledgers provided. SALES JOURNAL

Date

Sale No.

To Whom Sold

Cengage Learning Testing, Powered by Cognero

Page 6 Accounts Sales Tax Post. Receivable Sales Payable Ref. Debit Credit Credit

Page 40

Chapter 12—Special Journals

Date

Account Credited

CASH RECEIPTS JOURNAL

Page 8

Sales Accounts Tax Post General Receivable Sales Payable Credit Ref. Credit Credit Credit

Cash Debit

GENERAL JOURNAL Post Description Ref.

Date

Page 3 Debit

Credit

GENERAL LEDGER Account Cash Date

Item

Post Ref.

Account Accounts Receivable Post Date Item Ref.

Account Sales Tax Payable Post Date Item Ref.

Account Sales Post Cengage Learning Testing, Powered by Cognero

Debit

Credit

Account No. 101 Balance Debit Credit

Credit

Account No. 122 Balance Debit Credit

Credit

Account No. 231 Balance Debit Credit

Account No. 401 Balance Page 41

Chapter 12—Special Journals Date

Item

Ref.

Debit

Account Sales Returns and Allowances Post Date Item Ref. Debit

Credit

Debit

Credit

Account No. 401.1 Balance Debit Credit

ACCOUNTS RECEIVABLE LEDGER Account Tim Carney Post Date Item Ref. Debit Credit

Credit

Balance

Account James Koffsky Date

Item

Post Ref.

Debit

Credit

Balance

Post Ref.

Debit

Credit

Balance

Post Ref.

Debit

Credit

Balance

Account Joyce McKay Date

Item

Account Kevin Nolon Date

Item

ANSWER: SALES JOURNAL

Date May 2 9

18 19 Cengage Learning Testing, Powered by Cognero

Sale No.

To Whom Sold James Koffsky Kevin Nolon Joyce McKay Tim Carney

Accounts Post. Receivable Ref. Debit 265.00 498.20 116.60 174.90

Page 6 Sales Tax Sales Payable Credit Credit 250.00 15.00 470.00 28.20 110.00 6.60 165.00 9.90 Page 42

Chapter 12—Special Journals 28 29

James Koffsky Kevin Nolon

530.00 243.80 1,828.50

500.00 230.00 1,725.00

30.00 13.80 103.50

(122)

(401)

(231)

CASH RECEIPTS JOURNAL

Account Date Credited May 22 James Koffsky 31 Joyce McKay 31 Cash sales

Sales Accounts Tax Sales Post General Receivable Payable Cash Ref. Credit Credit Credit Credit Debit 222.60 222.60 84.80 84.80 ______ 2,600.00 156.00 2,756.00 307.40 2,600.00 156.00 3,063.40 (122)

GENERAL JOURNAL Post Date Description Ref. May 12 Sales Returns and Allowances 401.1 Sales Tax Payable 231 122/ Accounts Receivable/James Koffsky 26

Page 8

Sales Returns and Allowances Sales Tax Payable

401.1 231

Accounts Receivable/Joyce McKay

122/

(401)

(231)

(101)

Page 3 Credit Debit 40.00 2.40 42.40

30.00 1.80 31.80

GENERAL LEDGER Account Cash Date May 31

Item

Post Ref. CR8

Account Accounts Receivable Post Date Item Ref. May 12 J3 26 J3 Cengage Learning Testing, Powered by Cognero

Debit 3,063.40

Debit

Credit

Credit 42.40 31.80

Account No. 101 Balance Debit Credit 3,063.40

Account No. 122 Balance Debit Credit 42.40 74.20 Page 43

Chapter 12—Special Journals 31 31

S6 CR8

1,828.50

Account Sales Tax Payable Date May 12 26 31 31

Item

Post Ref. J3 J3 S6 CR8

Debit 2.40 1.80

Credit

103.50 156.00

Account Sales Date May 31 31

Item

Post Ref. S6 CR8

1,754.30 1,446.90

307.40

Debit

Credit 1,725.00 2,600.00

Account Sales Returns and Allowances Post Date Item Ref. Debit May 12 J3 40.00 26 J3 30.00

Credit

Account No. 231 Balance Debit Credit 2.40 4.20 99.30 255.30

Account No. 401 Balance Debit Credit 1,725.00 4,325.00

Account No. 401.1 Balance Debit Credit 40.00 70.00

ACCOUNTS RECEIVABLE LEDGER Account Tim Carney Post Date Item Ref. Debit Credit May 19 S6 174.90

Balance 174.90

Account James Koffsky Date May 2 12 22 28

Item

Post Ref. S6 J3 CR8 S6

Debit 265.00

Credit 42.40 222.60

530.00

Balance 265.00 222.60 0.00 530.00

Account Joyce McKay Date May 18 Cengage Learning Testing, Powered by Cognero

Item

Post Ref. S6

Debit 116.60

Credit

Balance 116.60 Page 44

Chapter 12—Special Journals 26 31

J3 CR8

31.80 84.80

84.80 0.00

Account Kevin Nolon Date May 9 29

Item

Post Ref. S6 S6

Debit 498.20 243.80

Credit

Balance 498.20 742.00

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Challenging COLL.HEIN.17.50 - LO: 12-2 COLL.HEIN.17.51 - LO: 12-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 40 min. 60. The purchases journal for J. K. Insurance for the month of October is represented below. Accounts Payable is account number 202 and Purchases is account number 501. Required: 1. Post the information in the purchases journal to the appropriate general ledger and accounts payable ledger accounts. 2. Prepare a schedule of accounts payable. PURCHASES JOURNAL

Date Oct. 2 4 8 9 10 15

Invoice No. 3118 3119 3120 3121 3122 3123

From Whom Purchased Express Florist T. C. S. Supplies Auto Body Repair Signs Unlimited Dynasty Limo T. C. S. Supplies

Page 5 Purchases Debit/ Post Accounts Payable Ref. Credit 3,550.00 2,790.00 3,850.00 4,150.00 2,380.00 2,150.00

GENERAL LEDGER Account Accounts Payable Date

Item

Post Ref.

Cengage Learning Testing, Powered by Cognero

Debit

Credit

Account No. 202 Balance Debit Credit

Page 45

Chapter 12—Special Journals

Account Purchases Date

Item

Post Ref.

Debit

Credit

Account No. 501 Balance Debit Credit

ACCOUNTS PAYABLE LEDGER Account Auto Body Repair Post Date Item Ref. Debit Credit

Balance

Account Dynasty Limo Date

Item

Post Ref.

Debit

Credit

Balance

Post Ref.

Debit

Credit

Balance

Post Ref.

Debit

Credit

Balance

Post Ref.

Debit

Credit

Balance

Account Express Florist Date

Item

Account Signs Unlimited Date

Item

Account T. C. S. Supplies Date

Item

ANSWER: PURCHASES JOURNAL

Date Oct. 2 4 8 9 Cengage Learning Testing, Powered by Cognero

Invoice No. 3118 3119 3120 3121

From Whom Purchased Express Florist T. C. S. Supplies Auto Body Repair Signs Unlimited

Page 5 Purchases Debit/ Post Accounts Payable Ref. Credit 3,550.00 2,790.00 3,850.00 4,150.00 Page 46

Chapter 12—Special Journals 10 15

3122 3123

Dynasty Limo T. C. S. Supplies

2,380.00 2,150.00 18,870.00 (501) (202)

GENERAL LEDGER Account Accounts Payable Date Oct. 31

Item

Post Ref. P5

Debit

Credit 18,870.00

Account Purchases Date Oct. 31

Item

Post Ref. P5

Debit 18,870.00

Credit

Account No. 202 Balance Debit Credit 18,870.00 Account No. 501 Balance Debit Credit 18,870.00

ACCOUNTS PAYABLE LEDGER Account Auto Body Repair Post Date Item Ref. Debit Credit Oct. 8 P5 3,850.00

Balance 3,850.00

Account Dynasty Limo Date Oct. 10

Item

Post Ref. P5

Debit

Credit 2,380.00

Balance 2,380.00

Post Ref. P5

Debit

Credit 3,550.00

Balance 3,550.00

Post Ref. P5

Debit

Credit 4,150.00

Balance 4,150.00

Debit

Credit 2,790.00 2,150.00

Balance 2,790.00 4,940.00

Account Express Florist Date Oct. 2

Item

Account Signs Unlimited Date Oct. 9

Item

Account T. C. S. Supplies Date Oct. 4 15

Item

Post Ref. P5 P5

Schedule of Accounts Payable Auto Body Repair Dynasty Limo Express Florist Cengage Learning Testing, Powered by Cognero

$ 3,850 2,380 3,550 Page 47

Chapter 12—Special Journals Signs Unlimited T. C. S. Supplies

4,150 4,940 $18,870

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.52 - LO: 12-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 15 min. 61. The special journal to record a cash sale is the ____________________ journal. ANSWER: cash receipts POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.51 - LO: 12-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 62. All individual entries in the sales journal are posted to the ____________________ ledger. ANSWER: accounts receivable POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.50 - LO: 12-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals 63. A(n) ____________________ journal is designed for recording only certain kinds of transactions. ANSWER: special POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.49 - LO: 12-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 64. The special journal to record a purchase of merchandise on account is the ____________________ journal. ANSWER: purchases POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.52 - LO: 12-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 65. The special journal to record a cash purchase of merchandise is the ____________________ journal. ANSWER: cash payments POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.53 - LO: 12-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 12—Special Journals Match the terms with the definitions. a. cash payments journal b. cash receipts journal c. sales journal d. special journal e. purchases journal DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.49 - LO: 12-1 COLL.HEIN.17.50 - LO: 12-2 COLL.HEIN.17.51 - LO: 12-3 COLL.HEIN.17.52 - LO: 12-4 COLL.HEIN.17.53 - LO: 12-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals KEYWORDS: Bloom's: Remembering NOTES: 1 min. 66. A journal designed for recording only certain kinds of transactions. ANSWER: d POINTS: 1 67. A special journal used to record only transactions involving the receipt of cash. ANSWER: b POINTS: 1 68. A special journal used to record only sales on account. ANSWER: c POINTS: 1 69. A special journal used to record transactions involving the payment of cash. ANSWER: a POINTS: 1 70. A special journal used to record only purchases of merchandise on account. ANSWER: e POINTS: 1

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Chapter 13—Accounting for Merchandise Inventory 1. Errors in the ending inventory have a direct effect on net income for the period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.54 - LO: 13-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. The term "FIFO" relates to the merchandise in inventory at the end of the accounting period, not to the merchandise sold during the period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. The "FIFO" and "LIFO" inventory costing methods are based on assumed cost flows that are not required to reflect the actual physical movement of merchandise within the company. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 4. Overstating the ending inventory causes the cost of goods sold to be overstated and net income to be understated. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.54 - LO: 13-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. Under the perpetual system of accounting for inventory, the merchandise inventory account is debited for the cost of all merchandise bought. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.56 - LO: 13-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. The specific identification method of inventory is generally practical only for businesses in which sales volume is relatively low and inventory unit value is relatively high. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 7. If merchandise is shipped FOB destination, the merchandise is the property of the selling company until it is received by the buying company. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. A method of assigning merchandise cost that requires that each item sold and each item remaining in inventory be separately identified with respect to its purchase cost is called last-in, first-out. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. A widely used method of allocating merchandise cost that assumes the first merchandise bought is the first merchandise sold is called the first-in, first-out method. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 13—Accounting for Merchandise Inventory 10. Last-in, first-out costing assigns the most recent purchase cost to the ending inventory shown on the balance sheet. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. A method of allocating merchandise cost that is based on the average cost of identical units is known as weightedaverage cost or average cost. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. When cost is greater than market value, it is considered a loss due to holding inventory. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 13. The natural business year is a fiscal year that starts and ends at the time the stock of merchandise is normally at its lowest level. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. The loss due to write-down of inventory should be reported on the income statement as an expense. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. Last-in, first-out costing matches the most current cost of items purchased against the current sales revenue. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 16. A method of allocating merchandise costs that assumes the sales in the period were made from the most recently purchased merchandise and the earliest merchandise bought remain in inventory is called the last-in, first-out method. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. The principle of conservatism states that gains should not be anticipated but that all potential losses should be recognized. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. If market value is less than cost, the difference between the cost and market value of inventory is considered a loss due to holding inventory and should be reported on the income statement as an expense. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 13—Accounting for Merchandise Inventory 19. Accurate inventory amounts are not necessary for accounting purposes because an error in inventory will "wash out" over a two-year period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.54 - LO: 13-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. When prices are rising, net income calculated by using the last-in, first-out method is smaller than the amount determined from using either the first-in, first-out or the weighted-average method. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. The gross profit (inventory valuation) method is appropriate if a firm's normal gross profit on sales has been relatively stable over time and for estimating the cost of inventory that was destroyed by casualty. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.57 - LO: 13-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 13—Accounting for Merchandise Inventory 22. Under the retail (inventory valuation) method, the amount of sales during the period is reduced by the normal profit percentage to determine the estimated cost of merchandise sold. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.57 - LO: 13-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. Under the periodic inventory system, no entries are made to the merchandise inventory or cost of goods sold accounts during the year. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.56 - LO: 13-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. In the perpetual inventory system, no year-end adjusting entry is necessary, as long as the physical inventory agrees with the amount reported in the merchandise inventory account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.56 - LO: 13-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 13—Accounting for Merchandise Inventory 25. Under the periodic system of accounting for inventory, the purchases account is debited for the cost of all merchandise purchased. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.56 - LO: 13-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. Under the perpetual inventory system, the balance in the merchandise inventory account is merely a record of the most recent physical inventory account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. When each unit of inventory can be specifically identified, the specific identification method can be used. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 28. If a difference is found between the physical count and the amount in the perpetual inventory records, the records must be corrected by an appropriate adjusting entry. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. The term "LIFO" relates to the merchandise in inventory at the end of the accounting period, not to the merchandise sold during the period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. Under conditions of rising prices, the FIFO inventory method provides the highest gross profit because the most recent purchase costs are matched against sales revenue. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 13—Accounting for Merchandise Inventory 31. When perpetual inventory records are kept, the merchandise inventory account in the general ledger is usually a control account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. The gross profit method estimates the ending inventory and cost of goods sold by using the firm's normal gross profit as a percentage of net sales. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.57 - LO: 13-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. The increasing use of computers and optical scanning devices at the point-of-sale probably will cause more businesses to switch from periodic to perpetual inventories. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 13—Accounting for Merchandise Inventory 34. The amount by which cost exceeds market value is considered a loss due to holding inventory and normally is charged to an account such as Loss on Write-Down of Inventory. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. Firms should report a loss due to write-down of inventory in the cost of goods sold account on the income statement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. The gross profit (inventory valuation) method requires keeping records of the selling prices of merchandise purchased. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.57 - LO: 13-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 13—Accounting for Merchandise Inventory 37. The retail method of inventory is preferred by businesses such as department and clothing stores because they compute inventory values at wholesale prices. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.57 - LO: 13-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. When merchandise is acquired on account and the perpetual system of inventory is used, the journal entry for the purchase would include a. debiting Purchases and crediting Accounts Payable. b. debiting Accounts Payable and crediting Merchandise Inventory. c. debiting Merchandise Inventory and crediting Accounts Payable. d. debiting Accounts Payable and crediting Purchases. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 39. Under the periodic inventory system, the merchandise inventory and the cost of goods sold for the current periods are determined a. when a physical inventory is taken. b. on a daily basis. c. on a quarterly basis. d. once a year. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.56 - LO: 13-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 40. Costs of goods sold may include all of the following EXCEPT a. insurance. b. shipping costs. c. manufacturing costs. d. management salaries. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 41. An error in the reported inventory will cause errors in all of the following EXCEPT a. the balance sheet. b. the statement of owner's equity. c. the following year's financial statements. d. the cash account. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.54 - LO: 13-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 42. The inventory system whereby the merchandise inventory account balance is merely a record of the most recent physical inventory count is called a. perpetual. b. LIFO. c. FIFO. d. periodic. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.56 - LO: 13-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 43. The inventory system that uses the merchandise inventory account as an active account is called a. perpetual. b. LIFO. c. FIFO. d. periodic. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.56 - LO: 13-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 44. When a fiscal year that starts and ends at the time the stock of merchandise is normally at its lowest level is selected, it is known as a(n) a. natural business year. b. calendar year. c. base year. d. accounting cycle. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 45. When merchandise is sold and the perpetual system of inventory is used, the journal entry for a sale would include a. debiting Accounts Receivable and crediting Sales. b. debiting Accounts Receivable and crediting Merchandise Inventory. c. debiting Accounts Receivable and crediting Cost of Goods Sold. d. debiting Cost of Goods Sold and crediting Sales. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 46. A method of allocating merchandise cost requiring each item sold and each item remaining in inventory to be separately identified with respect to its purchase cost is called the a. last-in, first-out method. b. first-in, first-out method. c. specific identification method. d. weighted-average method. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 47. A method of allocating merchandise cost that assigns the most recent purchased costs to the ending inventory shown on the balance sheet is called the a. last-in, first-out method. b. first-in, first-out method. c. specific identification method. d. weighted-average method. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 48. A method of allocating merchandise cost that assumes the sales in the period were made from the recently purchased merchandise and its earliest merchandise bought remains in the inventory is called the a. last-in, first-out method. b. first-in, first-out method. c. specific identification method. d. weighted-average method. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 49. The following data applies to a particular item of merchandise: On hand at start of period 1st purchase

300 500

$5.10 5.20

2nd purchase

700

5.30

3rd purchase Number of units available for sale On hand at end of period Number of units sold during period

600 2,100 500 1,600

5.50

Of the 1,600 units sold during the period, 300 were from the beginning inventory; 500 from the first purchase; 600 from the second purchase; and 200 from the last purchase. Using the specific identification costing method, the amount of the cost of goods sold would be a. $2,730. b. $8,410. c. $11,140. d. $13,870. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min. 50. A method of allocating merchandise cost that is based on the average cost of identical units is called the a. last-in, first-out method. b. first-in, first-out method. c. specific identification method. d. weighted-average method. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 51. The following data applies to a particular item of merchandise: On hand at start of period 1st purchase

300 500

$5.10 5.20

2nd purchase

700

5.30

3rd purchase Number of units available for sale On hand at end of period Number of units sold during period

600 2,100 500 1,600

5.50

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Chapter 13—Accounting for Merchandise Inventory 52. The following data applies to a particular item of merchandise: On hand at start of period 1st purchase

300 500

$5.10 5.20

2nd purchase

700

5.30

3rd purchase Number of units available for sale On hand at end of period Number of units sold during period

600 2,100 500 1,600

5.50

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Chapter 13—Accounting for Merchandise Inventory 53. The following data applies to a particular item of merchandise: On hand at start of period 1st purchase

300 500

$5.10 5.20

2nd purchase

700

5.30

3rd purchase Number of units available for sale On hand at end of period Number of units sold during period

600 2,100 500 1,600

5.50

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Chapter 13—Accounting for Merchandise Inventory 54. The following data applies to a particular item of merchandise: On hand at start of period 1st purchase

300 500

$5.10 5.20

2nd purchase

700

5.30

3rd purchase Number of units available for sale On hand at end of period Number of units sold during period

600 2,100 500 1,600

5.50

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Chapter 13—Accounting for Merchandise Inventory 55. The following data applies to a particular item of merchandise: On hand at start of period 1st purchase

300 500

$5.10 5.20

2nd purchase

700

5.30

3rd purchase Number of units available for sale On hand at end of period Number of units sold during period

600 2,100 500 1,600

5.50

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Chapter 13—Accounting for Merchandise Inventory 56. The following data applies to a particular item of merchandise: On hand at start of period 1st purchase

300 500

$5.10 5.20

2nd purchase

700

5.30

3rd purchase Number of units available for sale On hand at end of period Number of units sold during period

600 2,100 500 1,600

5.50

Of the 1,600 units sold during the period, 300 were from the beginning inventory; 500 from the first purchase; 600 from the second purchase; and 200 from the last purchase. Using the weighted-average costing method and rounding the average unit cost to the nearest whole cent, the cost of goods sold would be a. $11,140. b. $11,130. c. $8,480. d. $8,410. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 57. The following data applies to a particular item of merchandise: On hand at start of period 1st purchase

300 500

$5.10 5.20

2nd purchase

700

5.30

3rd purchase Number of units available for sale On hand at end of period Number of units sold during period

600 2,100 500 1,600

5.50

Of the 1,600 units sold during the period, 300 were from the beginning inventory; 500 from the first purchase; 600 from the second purchase; and 200 from the last purchase. Using the weighted-average costing method and rounding the average unit cost to the nearest whole cent, the value of the inventory on hand at the end of the period would be a. $2,650. b. $2,750. c. $2,730. d. $2,530. ANSWER: a POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 58. A method of allocating merchandise cost that assumes the first merchandise bought was the first merchandise sold is called the a. last-in, first-out method. b. first-in, first-out method. c. specific identification method. d. average cost method. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 59. The merchandise costing method that matches the most current cost of items purchased against the current sales revenue is called the a. last-in, first-out method. b. first-in, first-out method. c. specific identification method. d. weighted-average method. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 60. Lower-of-cost-or-market (for tax purposes) may be used with all of the following merchandise costing methods EXCEPT a. the last-in, first-out method. b. the first-in, first-out method. c. the weighted-average method. d. the specific identification method. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 61. Assigning of the lower-of-cost-or-market to the items that comprise the inventory of merchandise at the end of the account period is an application of which of the following concepts? a. materiality b. conservatism c. reliability d. full disclosure ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 62. Refer to the following data: Net sales, first month Normal gross profit as a percentage of sales Inventory, start of period Net purchases, first month

$13,000 45% $8,000 $7,000

Using the gross profit method of inventory estimation, the amount of normal gross profit would be a. $5,850. b. $3,600. c. $6,750. d. $15,000. ANSWER: a POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.57 - LO: 13-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min. 63. Refer to the following data: Net sales, first month Normal gross profit as a percentage of sales Inventory, start of period Net purchases, first month

$13,000 45% $8,000 $7,000

Using the gross profit method of inventory estimation, the cost of goods sold would be a. $5,850. b. $7,150 c. $7,850 d. $15,000. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.57 - LO: 13-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 13—Accounting for Merchandise Inventory 64. Assume that in Year 1, the ending merchandise inventory is overstated by $30,000. If this is the only error in Years 1 and 2, fill in the items below, indicating which items will be understated, overstated, or correctly stated, for Years 1 and 2.

Ending merchandise inventory Beginning merchandise inventory Cost of goods sold Gross profit Net income Ending owner's capital

Year 1 __________ __________ __________ __________ __________ __________

Year 2 __________ __________ __________ __________ __________ __________

ANSWER: Ending merchandise inventory Beginning merchandise inventory Cost of goods sold Gross profit Net income Ending owner's capital POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.54 - LO: 13-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Understanding NOTES: 2 min.

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Year 1 overstated correct understated overstated overstated overstated

Year 2 correct overstated overstated understated understated correct

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Chapter 13—Accounting for Merchandise Inventory 65. R. & K. Company's beginning inventory and purchases during the fiscal year ended December 31, 20--, were as follows:

Apr. 2 - 1st Purchase

Units 20 30

Unit Price $12 $13

Total Cost $ 240 390

Aug. 6 - 2nd Purchase

$14

350

Nov. 9 - 3rd Purchase

$18

450 $1,430

Jan. 1 - Beginning inventory

There are 20 units of inventory on hand at December 31, 20--. Required: 1. Calculate the total amount to be assigned to the ending inventory under each of the following methods: a. First-in, first-out (FIFO) b. Last-in, first-out (LIFO) 2. Assume the market price per unit (cost to replace) of the R. &. K. Company's inventory on December 31, was $16. Calculate the total amount to be assigned to the ending inventory on December 31, under each of the following methods: a. FIFO lower-of-cost-or-market b. Weighted-average lower-of-cost-or-market ANSWER:

a. b.

20 units @ $18 = $360 20 units @ $12 = $240

FIFO cost Market (20 @ $16) Choose market Weighted-average cost per unit ($1,430/100 = $14.30/unit) Avg. Cost (20 @ $14.30) Market (20 @ $16) Choose weighted-average cost

$360 $320 $320 $286 $320 $286

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Chapter 13—Accounting for Merchandise Inventory 66. Delmar Industries uses the perpetual inventory method in accounting for inventory. Prepare the necessary adjusting entry for each of the following independent cases using the cost of goods sold account. Case 1 Physical count as of April 30 Perpetual inventory records as of April 30

$43,100 41,800

Case 2 Physical count as of April 30 Perpetual inventory records as of April 30

$37,800 38,300

ANSWER:

Case 1 JOURNAL Date

Description ADJUSTING ENTRIES Apr. 30 Merchandise Inventory Cost of Goods Sold

Page 1 Post Ref.

Debit

Credit

1,300.00 1,300.00

Case 2 JOURNAL Date Apr.

Description ADJUSTING ENTRIES 30 Cost of Goods Sold Merchandise Inventory

Page 1 Post Ref.

Debit

Credit

500.00 500.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Understanding NOTES: 2 min.

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Chapter 13—Accounting for Merchandise Inventory 67. A fire completely destroyed the entire inventory of Printing Delight Co. on March 15, 20--. Fortunately, the books were not destroyed in the fire. The following information is taken from the books of Printing Delight Co. for the time period, January 1, 20-- through March 15, 20--: Beginning inventory, January 1, 20-Net purchases, January 1, through March 15, 20-Net sales, January 1, through March 15, 20-Normal gross profit percentage of sales

$ 45,000 252,000 378,000 37%

Required: 1. Estimate the cost of goods sold for the time period January 1 through March 15, 20--, using the gross profit method. 2. Estimate the amount of merchandise inventory destroyed in the fire on March 15, 20--, using the gross profit method. ANSWER:

Estimated cost of goods sold: Net sales Normal gross profit ($378,000 × 37%) Estimated cost of goods sold

$378,000 139,860 $238,140

Estimated inventory at March 15, 20--: Inventory, January 1, 20-Net purchases, January 1, through March 15 Cost of goods available for sale Less estimated cost of goods sold Estimated inventory on March 15, 20--

$ 45,000 252,000 $297,000 238,140 $ 58,860

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Chapter 13—Accounting for Merchandise Inventory 68. The following information is taken from the books of All in the Family Center for the first quarter of its fiscal year ending on April 30, 20--:

Inventory, start of period (January 1, 20--) Net purchases during the period Net sales for the period

Cost $ 37,000 174,000

Retail $ 66,000 330,000 310,500

Required: 1. Estimate the ending inventory as of April 30, 20--, using the retail inventory method. 2. Estimate the cost of goods sold for the time period, January 1, through April 30, using the retail inventory method. ANSWER: 1.

Inventory, start of period (January 1, 20--) Net purchases during the period Goods available for sale Less net sales for the period Inventory, end of period, at retail

Cost $ 37,000 174,000 $211,000

Retail $ 66,000 330,000 $396,000 310,500 $ 85,500

Ratio of cost to retail prices of goods available for sale: ($211,000/$396,000) 53%* Inventory, end of period, at estimated cost: (53% of $85,500) $45,315 * Rounded 2.

Estimated cost of goods sold (53% of $310,500)

$164,565

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.57 - LO: 13-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Applying NOTES: 5 min. 69. Assume the beginning inventory as of January 1 consisted of 500 units that were purchased for $8.25 each. During the month, three new purchases were made. The first purchase consisted of 700 units costing $8.50 each, the second purchase had 800 units costing $9.00 each, and the third purchase had 600 units costing $9.50 each. At the end of the month, ending inventory shows 700 units. Compute the cost of goods sold and the ending inventory for the company using each of the following methods. Also determine the gross margin if the total sales revenue is $43,000. a. b. c. d.

Specific identification: Of the units sold, 300 were from the beginning inventory, 600 from the first purchase, 700 from the second purchase, and 300 from the third purchase. First-in, first-out (FIFO) Weighted-average (round the unit price) Last-in, first-out (LIFO)

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Chapter 13—Accounting for Merchandise Inventory ANSWER:

Specific identification: Beginning inventory First purchase Second purchase Third purchase

Cost of Goods Sold 300 @ $8.25 = $ 2,475 600 @ $8.50 = 5,100 700 @ $9.00 = 6,300 300 @ $9.50 = 2,850 1,900 $16,725

Ending Inventory 200 @ $8.25 = $1,650 100 @ $8.50 = 850 100 @ $9.00 = 900 300 @ $9.50 = 2,850 700 $6,250

Gross profit = Sales revenue − Cost of goods sold = $43,000 − $16,725 = $26,275 First-in, first-out: Beginning inventory First purchase Second purchase Third purchase

Cost of Goods Sold 500 @ $8.25 = $ 4,125 700 @ $8.50 = 5,950 700 @ $9.00 = 6,300 0 @ $9.50 = 0 1,900 $16,375

Ending Inventory 0 @ $8.25 = $ 0 0 @ $8.50 = 0 100 @$9.00 = 900 600 @ $9.50 = 5,700 700 $6,600

Gross profit = Sales revenue − Cost of goods sold = $43,000 − $16,375 = $26,625 Weighted-average: Per unit cost = Total cost ÷ Total units = $22,975 ÷ 2,600 = $8.84 per unit* Cost of goods sold = 1,900 units × $8.84 = $16,796 Ending inventory = 700 units × $8.84 = $6,188 Gross profit = $43,000 – $16,796 = $26,204 * Rounded Last-in, first-out: Cost of Goods Sold Beginning inventory 0 @ $8.25 = $ 0 First purchase 500 @ $8.50 = 4,250 Second purchase 800 @ $9.00 = 7,200 Third purchase 600 @ $9.50 = 5,700 1,900 $17,150

Ending Inventory 500 @ $8.25 = $4,125 200 @ $8.50 = 1,700 0 @ $9.00 = 0 0 @ $9.50 = 0 700 $5,825

Gross profit = Sales revenue – Cost of goods sold = $43,000 – $17,150 = $25,850 POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Applying NOTES: 20 min. Cengage Learning Testing, Powered by Cognero

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Chapter 13—Accounting for Merchandise Inventory 70. Over the past several years, Landmark Supplies has averaged a gross profit of 34%. At the end of 20--, the income statement of the company included the information shown below: Sales Cost of goods sold: Merchandise inventory, January 1, 20-Purchases Goods available for sale Less merchandise inventory, December 31, 20-Cost of goods sold Gross profit on sales

$1,100,000 $ 67,000 840,000 $907,000 130,000 777,000 $ 323,000

Investigation revealed that employees of the company had not taken an actual physical count of the inventory on December 31, 20--. Instead, they had merely estimated the inventory. Required: Under the gross profit method of inventory estimation, determine the following items to check the accuracy of the employees' estimates. Gross profit on sales Cost of goods sold Ending inventory

$___________ $___________ $___________

Gross profit on sales ($1,100,000 × 34%) Cost of goods sold ($1,100,000 − $374,000) Ending inventory ($907,000 − $726,000) POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Applying NOTES: 3 min. ANSWER:

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$374,000 $726,000 $181,000

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Chapter 13—Accounting for Merchandise Inventory 71. The April 1 inventory of Inotech Inc. had a cost of $35,505 and had a retail value of $79,000. During April, merchandise was purchased for $125,000 and marked to sell for $262,500. April sales totaled $201,000.

Required: Calculate the following items using the retail method of inventory estimation. Retail value of ending inventory Cost of goods sold in April Cost of ending inventory

$___________ $___________ $___________

ANSWER: Beginning inventory Purchases Goods available for sale Cost of goods sold Ending inventory

Cost $ 35,505 125,000 $160,505 94,470 $ 66,035

Retail $ 79,000 262,500 $341,500 201,000 $140,500

= .47

Ending inventory (retail) = $341,500 − $201,000 = $140,500 Cost of goods sold (cost) = $201,000 × .47 = $94,470 Ending inventory (cost) = $160,505 − $94,470 = $66,035 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.57 - LO: 13-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Applying NOTES: 4 min.

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Chapter 13—Accounting for Merchandise Inventory 72. Smart Tech's beginning inventory and purchases for the month of August were as follows:

Beginning inventory First purchase Second purchase Third purchase Number of units available for sale On hand Number of units sold

# of Units 600 400 500 300 1,800 400 1,400

Cost per Unit $7.00 $7.50 $8.00 $8.75

Amount $ 4,200 3,000 4,000 2,625 $13,825

Required: Calculate the total amount to be assigned to cost of goods sold and ending inventory for August 31, using each of the following methods. a. First-in, first-out (FIFO) b. Last-in, first-out (LIFO) c. Weighted-average cost (round the unit price) ANSWER:

First-in, first-out: Beginning inventory First purchase Second purchase Third purchase

Cost of Goods Sold 600 @ $7.00 = $ 4,200 400 @ $7.50 = 3,000 400 @ $8.00 = 3,200 0 @ $8.75 = 0 1,400 $10,400

Ending Inventory 0 @ $7.00 = $ 0 0 @ $7.50 = 0 100 @ $8.00 = 800 300 @ $8.75 = 2,625 400 $3,425

Last-in, first-out: Beginning inventory First purchase Second purchase Third purchase

Cost of Goods Sold 200 @ $7.00 = $ 1,400 400 @ $7.50 = 3,000 500 @ $8.00 = 4,000 300 @ $8.75 = 2,625 1,400 $11,025

Ending Inventory 400 @ $7.00 = $2,800 0 @ $7.50 = 0 0 @ $8.00 = 0 0 @ $8.75 = 0 400 $2,800

Weighted-average: Per unit cost = Total cost ÷ Total units = $13,825 ÷ 1,800 = $7.68 per unit* Cost of goods sold = 1,400 units × $7.68 = $10,752 Ending inventory = 400 units × $7.68 = $3,072 POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Applying NOTES: 10 min. Cengage Learning Testing, Powered by Cognero

*Rounded

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Chapter 13—Accounting for Merchandise Inventory 73. Bill Blumberg owns an auto parts business called Bill's Auto Parts. The following transactions took place during July of the current year. July 5 8 12 15 22

Purchased merchandise on account from Wheeler Warehouse, $4,300. Paid freight charge on merchandise purchased, $230. Sold merchandise on account to Big Time Spoiler, $3,500. The merchandise cost $2,500. Received a credit memo from Wheeler Warehouse for merchandise, $670. Issued a credit memo to Big Time Spoiler for merchandise returned, $820. The cost of the merchandise is $550.

Required: 1. Journalize the above transactions in a general journal using the periodic inventory method. 2. Journalize the above transactions in a general journal using the perpetual inventory method.

Date

GENERAL JOURNAL Post Description Ref.

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Page 1 Debit

Credit

Page 39

Chapter 13—Accounting for Merchandise Inventory

ANSWER: 1. GENERAL JOURNAL Date Description July 5 Purchases Accounts Payable

Page 1 Post Ref.

Debit 4,300.00

Credit 4,300.00

8 Freight-In Cash

230.00

12 Accounts Receivable Sales

3,500.00

15 Accounts Payable Purchases Returns and Allowances

670.00

22 Sales Returns and Allowances Accounts Receivable

820.00

230.00

3,500.00

670.00

820.00

2. GENERAL JOURNAL Post Date Description Ref. July 5 Merchandise Inventory Accounts Payable

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Page 1 Debit 4,300.00

Credit 4,300.00

8 Merchandise Inventory Cash

230.00

12 Accounts Receivable Sales

3,500.00

12 Cost of Goods Sold Merchandise Inventory

2,500.00

15 Accounts Payable Merchandise Inventory

670.00

22 Sales Returns and Allowances Accounts Receivable

820.00

22 Merchandise Inventory

550.00

230.00

3,500.00

2,500.00

670.00

820.00

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Chapter 13—Accounting for Merchandise Inventory Cost of Goods Sold

550.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Applying NOTES: 5 min. 74. The ____________________ holds the merchandise of another business to be sold. ANSWER: consignee POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 75. The ____________________ assumes that the first goods purchased were the first goods sold and, therefore the latest goods purchased remain in inventory. ANSWER: first-in, first-out method POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 76. The prevailing price at which goods are purchased is known as ____________________. ANSWER: market value POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 77. The accounting practice of ____________________ states that we should never anticipate gains, but always anticipate and account for losses. ANSWER: conservatism POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 78. Under the ____________________, the ending inventory and cost of goods sold are determined at the end of the accounting period, when a physical inventory is taken. ANSWER: periodic inventory system POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.56 - LO: 13-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 79. The ideal time to take a physical inventory is when the quantity of goods on hand is at the ____________________ level. ANSWER: lowest POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 80. A(n) ____________________ is a fiscal year that starts and ends at the time the stock of goods is normally at its lowest level. ANSWER: natural business year POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 81. The ____________________ is a way of estimating inventory in which a business's normal gross profit percentage is used to estimate the cost of goods sold and ending inventory. ANSWER: gross profit method POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.57 - LO: 13-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 82. The ____________________ assumes that the sales in the period were made from the most recently purchased goods. Therefore, the earliest goods purchased remain in inventory. ANSWER: last-in, first-out method POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 83. Goods held on consignment are the property of the ____________________. ANSWER: consignor POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 84. Under the ____________________, cost of goods sold and the amount of merchandise inventory on hand are updated when merchandise is bought and sold. ANSWER: perpetual inventory system POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 85. The ____________________ method of allocating merchandise cost is based on the average cost of identical units. ANSWER: weighted-average POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 86. The ____________________ is a variation of the gross profit method that is used by department and clothing stores, to estimate the cost of goods sold and ending inventory. ANSWER: retail method POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.57 - LO: 13-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 87. The ____________________ method is an inventory valuation method under which inventory is valued at the cost at the time of purchase or the replacement cost, whichever is lowest. ANSWER: lower-of-cost-or-market POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 13—Accounting for Merchandise Inventory 88. ____________________ is the principle that states that a business should use the same accounting methods from period to period. This improves the comparability of the financial statements over time. ANSWER: Consistency POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 89. The cost that is assigned to inventory includes the purchase price, delivery cost, insurance, and occasionally, ____________________. ANSWER: storage fees POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.55 - LO: 13-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. average cost b. conservatism c. perpetual inventory system d. market value e. consignor f. consistency g. cost h. first-in, first-out method i. gross profit method j. last-in, first-out method k. inventory sheet DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.55 - LO: 13-3 COLL.HEIN.17.56 - LO: 13-2 COLL.HEIN.17.57 - LO: 13-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication Cengage Learning Testing, Powered by Cognero

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Chapter 13—Accounting for Merchandise Inventory TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 90. A method of allocating merchandise cost which assumes that the sales in the period were made from the most recently purchased goods. Therefore, the earliest goods purchased remain in inventory. ANSWER: j POINTS: 1 91. The principle that states that a business should use the same accounting methods from period to period. This improves the comparability of the financial statements over time. ANSWER: f POINTS: 1 92. The accounting practice that states that we should never anticipate gains, but always anticipate and account for losses. ANSWER: b POINTS: 1 93. The cost to replace inventory at the prevailing purchase price. ANSWER: d POINTS: 1 94. The owner of the merchandise that is held by another business. ANSWER: e POINTS: 1 95. Under this system, cost of goods sold and the amount of merchandise inventory on hand are updated when merchandise is bought and sold. ANSWER: c POINTS: 1 96. A method of allocating merchandise cost which assumes that the first goods purchased were the first goods sold and, therefore, that the latest goods purchased remain in inventory. ANSWER: h POINTS: 1 97. A method of estimating inventory in which a business's normal gross profit percentage is used to estimate the cost of goods sold and ending inventory. ANSWER: i POINTS: 1 Match the terms with the definitions. a. average cost b. weighted-average method c. consignee Cengage Learning Testing, Powered by Cognero

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Chapter 13—Accounting for Merchandise Inventory d. consigned goods e. specific identification method f. retail method g. cost h. physical inventory i. periodic inventory system j. in transit k. inventory sheet l. natural business year m. lower-of-cost-or-market method DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.55 - LO: 13-3 COLL.HEIN.17.56 - LO: 13-2 COLL.HEIN.17.57 - LO: 13-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 98. The company holding the merchandise of another business to be sold. ANSWER: c POINTS: 1 99. A fiscal year that starts and ends at the time the stock of goods is normally at its lowest level. ANSWER: l POINTS: 1 100. An inventory valuation method under which inventory is valued at cost or replacement cost, whichever is lower. ANSWER: m POINTS: 1 101. A variation of the gross profit method that is used by many retail businesses, to estimate the cost of goods sold and ending inventory. ANSWER: f POINTS: 1 102. A method of allocating merchandise cost based on the average cost of identical units. The average cost of identical units is determined by dividing the total cost of units available for sale by the total number of units available for sale. ANSWER: b POINTS: 1

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Chapter 13—Accounting for Merchandise Inventory 103. Goods that are in the process of being shipped between the seller and the buyer. ANSWER: j POINTS: 1 104. Under this system, the ending inventory and cost of goods sold are determined at the end of the accounting period, when a physical inventory is taken. ANSWER: i POINTS: 1 105. A method of allocating merchandise cost in which each unit of inventory is recognized at its purchase price. ANSWER: e POINTS: 1 106. Counting the goods on hand at the end of the period to allocate merchandise costs between sold and unsold goods. ANSWER: h POINTS: 1 107. Goods that are held by one business for sale but that are owned by another business. ANSWER: d POINTS: 1

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 1. The merchandise inventory account is never debited or credited during the year using the periodic method. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. Two adjustments are made to the merchandise inventory account on the work sheet. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. The merchandise inventory account always reflects the current inventory on hand. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 4. The amount of inventory on hand is determined by physically counting the goods on hand and determining the cost of those goods. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. At the end of the accounting period, the merchandise inventory account is credited for the beginning inventory amount. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. Both the debit and credit amounts in the merchandise inventory account at the end of an accounting period are used to calculate the cost of goods sold. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 7. The credit amount for Income Summary in the Adjusted Trial Balance column reflects the inventory on hand at the end of the accounting period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. Merchandise Inventory has a normal credit balance. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. If the ending inventory is understated for any reason, net income will be overstated. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 10. If beginning inventory is $30,000 and ending inventory is $35,000, the cost of the inventory on hand at the end of the accounting period is $35,000. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. After adjustments are made to the merchandise inventory account and posting is completed, the income summary account will reflect both the amount of beginning and ending inventory. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. The income summary account will always reflect the same balance as the merchandise inventory account at the end of the accounting period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 13. If beginning inventory is $12,000 and ending inventory is $9,000, the first step in the adjusting process is to credit Merchandise Inventory for $12,000. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. If beginning inventory is $80,000 and ending inventory is $10,000, the balance of the merchandise inventory account after adjustments will be $70,000. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. The credit to the merchandise inventory account when making adjustments at the end of the accounting period will be the same amount as was debited at the end of the previous accounting period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 16. Some businesses require payment before delivering a product or performing a service. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. Cash received in advance for performing a service or delivering a product is called unearned revenue. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. Unearned Revenue is a liability account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 19. Under the cash basis of accounting, revenue is recorded when earned regardless of when cash is received. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. The transaction to record unearned revenue results in an increase to an asset account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. When unearned revenue is finally earned, a revenue account is debited to reflect the amount of the revenue earned. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 22. The balance of Unearned Revenue is reported on the income statement at the end of the accounting period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Understanding NOTES: 1 min. 23. An increase in a revenue account may reflect a decrease in a liability account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. An increase in a revenue account may reflect an increase in an asset account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 25. Purchases Returns and Allowances is a contra-revenue account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. Purchases Discounts is a contra-cost account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. Adjustments are made on the work sheet for both beginning and ending Merchandise Inventory. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.60 - LO: 14-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 28. A contra-revenue account is given a ".1" extension to its related ledger account's number. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. When part of the amount of unearned revenue has been earned, the unearned revenue account must be adjusted. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. When part of the amount of unearned revenue has been earned and the account adjusted accordingly, a revenue account must be adjusted by that partial amount. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 31. Only the debit amount for the income summary account must be extended in the work sheet. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.60 - LO: 14-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. The adjusted balance of the merchandise inventory account is extended to the Balance Sheet columns of the work sheet. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.60 - LO: 14-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. Only the debit adjustment amount in the merchandise inventory account is extended to the Adjusted Trial Balance columns of the work sheet. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.61 - LO: 14-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 34. Only the adjusted credit balance in the merchandise inventory account is extended to the Adjusted Trial Balance columns of the work sheet. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.61 - LO: 14-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. After journalizing adjusting entries, the amounts must be posted to the accounts in the general ledger. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.61 - LO: 14-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. In journalizing adjusting entries, Merchandise Inventory is credited for the amount of ending inventory. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.61 - LO: 14-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 37. In journalizing adjusting entries, an Unearned Revenue account is credited for any portion earned during the accounting period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.61 - LO: 14-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. Which of the following accounts is never debited or credited during the accounting period? a. Owner's Capital b. Purchases Returns and Allowances c. Merchandise Inventory d. Interest Income ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 39. Actually counting the goods on hand at the end of the accounting period and determining the cost of these goods by reviewing the accounting records is called a. the cost of goods sold. b. the physical inventory. c. freight-in. d. accumulated depreciation. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 40. A beginning inventory of $75,000 is removed from the merchandise inventory account by a. debiting $75,000 to Merchandise Inventory. b. crediting $75,000 to Merchandise Inventory. c. debiting $75,000 to Purchases. d. crediting $75,000 to Income Summary. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 41. Unearned revenue is reported as a(n) a. current liability on the balance sheet. b. contra-asset account on the chart of accounts. c. owner's equity account on the work sheet. d. asset on the balance sheet. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 42. The income summary account, after adjusting entries are posted, reflects the a. beginning inventory amount. b. ending inventory amount. c. beginning and ending inventory amounts. d. cash income from business transactions. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 43. If the ending inventory is understated for any reason, a. net income will be overstated. b. net income will be understated. c. liabilities will be overstated. d. liabilities will be understated. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 44. Which account balance is NOT used to compute the cost of goods sold? a. Sales b. Merchandise Inventory c. Purchases d. Purchases Discounts ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 45. Sports, Inc., plans to sell season football tickets for the 10 games played from September through November. These tickets sell for $5 each at the gate or for $45 per season package purchased before April 30. On April 30, the office reports that it has sold 200 season ticket packages and has only 50 left. The correct entry to record the sale of the season tickets is a. debit Cash and credit Unearned Revenue for $9,000. b. debit Cash and credit Revenue for $11,250. c. debit Unearned Revenue and credit Revenue for $9,000. d. to determine cost of goods sold. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 46. Under the perpetual inventory method, when inventory is purchased, Merchandise Inventory a. is debited and Cash or Accounts Payable is credited. b. is credited and Cash or Accounts Payable is debited. c. and Accounts Payable are credited and Cash is debited. d. and Accounts Payable are debited and Cash is credited. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.62 - LO: 14-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 47. Cash received prior to delivering a product or performing a service is called a(n) a. unearned asset. b. unearned revenue. c. unearned expense. d. unearned contra-asset. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 48. If a difference is found between the physical count and the amount in the perpetual inventory records, an adjusting entry is made to which of the following accounts? a. Inventory Short and Over b. Purchases c. Accounts Payable d. Accounts Receivable ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.62 - LO: 14-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 49. A typical account found under the heading of "Revenue" in a chart of accounts is a. Cash. b. Sales. c. Freight-In. d. Purchases. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 50. An example of a contra-revenue account is a. Purchases. b. Purchases Returns and Allowances. c. Purchases Discounts. d. Sales Returns and Allowances. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 51. Which of the following accounts would NOT be found under the heading of "Cost of Goods Sold" in a chart of accounts? a. Purchases b. Purchases Returns and Allowances c. Freight-In d. Supplies ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 52. In preparing a work sheet, the amounts for the Trial Balance columns are copied from the a. general journal. b. sales and purchases journal. c. general ledger. d. current chart of accounts. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.60 - LO: 14-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 53. If Purchases is Account No. 501, the correct account number for Purchases Returns and Allowances is a. 502. b. 601. c. 501.1. d. 501.a. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 54. Both the debit and credit amounts from which of the following accounts are extended to the Adjusted Trial Balance columns of the work sheet? a. Merchandise Inventory b. Purchases Returns and Allowances c. Interest Revenue d. Income Summary ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.60 - LO: 14-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 55. During the accounting period, the Unearned Revenue account had a balance of $50,000 for computer equipment and software yet to be delivered. On March 31, a delivery of all of the equipment was made, leaving $5,000 worth of software pending. The correct journal entry to record this activity on March 31 is to a. debit Unearned Revenue and credit Revenue for $45,000. b. debit Unearned Revenue and credit Revenue for $5,000. c. debit Cash and credit Unearned Revenue for $45,000. d. debit Computer Equipment and credit Cash for $45,000. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 56. A work sheet is prepared a. from [date] to [date]. b. for the [period] ended [date]. c. at any time in the accounting period. d. always on December 31. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.60 - LO: 14-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-05-Accounting Cycle KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 57. Merchandise Inventory is listed as a(n) a. current asset. b. current liability. c. expense. d. revenue. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 58. On a work sheet, the Debit column of the Income Statement totals $550,356 and the Credit column totals $734,225. This represents a. unbalanced totals indicating that an error exists. b. a net loss to the business. c. other expenses. d. a net income for the business. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.60 - LO: 14-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 59. At the end of the accounting period, the correct entry in the general journal to adjust for ending inventory is to a. debit Merchandise Inventory and credit Unearned Revenue. b. debit Income Summary and credit Merchandise Inventory. c. debit Merchandise Inventory and credit Income Summary. d. debit Other Revenue and credit Income Summary. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 60. Which of the following is NOT a formal part of the accounting system? a. balance sheet b. income statement c. statement of owner's equity d. the work sheet ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.61 - LO: 14-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 61. On a work sheet, the Debit columns of the Income Statement and the Balance Sheet both total more than the Credit columns. This represents a. an error in the accounting procedures for the period. b. a net loss. c. a net income. d. no gain or loss. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.60 - LO: 14-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Understanding NOTES: 1 min. 62. On a work sheet, the amount entered in the Credit column of the Balance Sheet to balance the debits and credits is $56,000. This represents a. an error of $28,000 in balancing the accounts. b. a net income of $56,000. c. a net loss of $56,000. d. accumulated depreciation and other expenses. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.60 - LO: 14-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Understanding NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 63. At the end of the accounting period, the correct entry in the general journal to adjust for beginning inventory is to a. debit Purchases and credit Merchandise Inventory. b. debit Merchandise Inventory and credit Sales. c. debit Income Summary and credit Merchandise Inventory. d. debit the Capital account and credit a revenue account. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 64. Complete the Adjustments column of the work sheet represented below. Ending merchandise inventory is $92,000. Work Sheet (partial) Account Title Merchandise Inventory Income Summary Purchases Purchases Returns and Allowances Purchases Discounts Freight-In

Trial Balance Adjustments Debit Credit Debit Credit 81,000 273,000 12,100 21,000 5,300

ANSWER: Work Sheet (partial) Trial Balance Adjustments Account Title Debit Credit Debit Credit Merchandise Inventory 81,000 92,000 81,000 Income Summary 81,000 92,000 Purchases 273,000 Purchases Returns and Allowances 12,100 Purchases Discounts 21,000 Freight-In 5,300 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 2 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 65. Use the following information to prepare the cost of goods sold section of the income statement for Beth's Jewels. Beginning merchandise inventory Ending merchandise inventory Purchases Purchases returns and allowances Purchases discounts Freight-in

$41,000 34,000 52,000 4,700 1,300 900

Cost of Goods Sold: Merchandise inventory, January 1 Purchases Less: Purchases returns and allowances Purchases discounts Net purchases Add freight-in Cost of goods purchased Goods available for sale Less: Merchandise inventory, December 31 Cost of goods sold POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Understanding NOTES: 3 min. ANSWER:

$41,000 $52,000 $4,700 1,300

6,000 $46,000 900 46,900 $87,900 34,000 $53,900

66. The trial balance and adjusted trial balance represented below were entered on the work sheet of Blue Grass Notes for the year ended December 31, 20--.

Required: 1. Examine the trial balance and adjusted trial balance and prepare the year-end adjusting entries for Blue Grass Notes. 2. Prepare the cost of goods sold section of the income statement for Blue Grass Notes for the year ended December 31, 20--. Work Sheet (partial) Account Title Cash Accounts Receivable Merchandise Inventory Supplies Prepaid Insurance Cengage Learning Testing, Powered by Cognero

Trial Balance Debit Credit 18,040 4,400 42,600 2,530 6,900

Adjusted Trial Balance Debit Credit 18,040 4,400 40,400 2,530 3,850 Page 28

Chapter 14—Adjustments and the Work Sheet for a Merchandising Business Store Equipment Accumulated Depreciation—Store Equipment Building Accumulated Depreciation—Building Land Accounts Payable Sales Tax Payable Wages Payable Mortgage Payable Unearned Sales Revenue Delta Tools, Capital Delta Tools, Drawing Income Summary Sales Sales Returns and Allowances Purchases Purchases Returns and Allowances Purchases Discounts Freight-In Wages Expense Telephone Expense Utilities Expense Depreciation Expense—Store Equipment Depreciation Expense—Building Insurance Expense Advertising Expense Miscellaneous Expense

118,800

118,800 46,530

132,000

64,130 132,000

68,200 69,000

74,800 69,000

8,280 1,320

8,280 1,320 3,410 91,000 330 132,000

91,000 3,300 132,000 26,400

26,400 42,600 250,800

1,540 105,960

40,400 253,770

1,540 105,960 2,650 10,230

2,650 10,230

1,320 15,300 25,080 23,980

1,320 18,710 25,080 23,980 17,600 6,600 3,050 15,180 15,180 5,280_______ 5,280_______ 614,310 614,310 682,320 682,320

ANSWER: GENERAL JOURNAL Date

Description ADJUSTING ENTRIES Income Summary Merchandise Inventory

Post Ref.

Debit

42,600.00 40,400.00

Insurance Expense Prepaid Insurance

3,050.00

Accumulated Depreciation—Store Equipment

Credit

42,600.00

Merchandise Inventory Income Summary

Depreciation Expense—Store Equipment

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40,400.00

3,050.00

17,600.00 17,600.00 Page 29

Chapter 14—Adjustments and the Work Sheet for a Merchandising Business

Depreciation Expense—Building Accumulated Depreciation— Building

6,600.00

Wages Expense Wages Payable

3,410.00

Unearned Sales Revenue Sales

2,970.00

6,600.00

3,410.00

2,970.00

Blue Grass Notes Income Statement (partial) For the year ended December 31, 20-Cost of Goods Sold: Merchandise inventory, January 1 Purchases Less: Purchases returns and allowances Purchases discounts Net purchases Add freight-in Cost of goods purchased Goods available for sale Less: Merchandise inventory, December 31 Cost of goods sold POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.60 - LO: 14-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Understanding NOTES: 10 min.

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$ 42,600 $105,960 $ 2,650 10,230

12,880 $ 93,080 1,320 94,400 $137,000 40,400 $ 96,600

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 67. Journalize the necessary adjusting entries for the following (partial) trial balance. Based on a physical count, the ending merchandise inventory is $67,000. Unearned revenue at year-end was $4,230. Account Title Cash Accounts Receivable Merchandise Inventory Unearned Revenue Revenue Purchases Purchases Discounts

Debit 7,500 17,000 86,000

Credit

20,800 193,000 82,000 4,100

ANSWER: GENERAL JOURNAL

Date

Description ADJUSTING ENTRIES Income Summary Merchandise Inventory

Page 1 Post Ref.

Debit

Credit

86,000.00 86,000.00

Merchandise Inventory Income Summary

67,000.00

Unearned Revenue Revenue

16,570.00

67,000.00

16,570.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.61 - LO: 14-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Understanding NOTES: 3 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 68. Journalize the adjusting entries from the partial work sheet for a merchandising firm.

Account Title Merchandise Inventory Income Summary

Adjusted Trial Income Balance Sheet Balance Statement Debit Credit Debit Credit Debit Credit 43,800 43,800 53,000 43,800 53,000 43,800

ANSWER: GENERAL JOURNAL

Date

Description ADJUSTING ENTRIES Income Summary Merchandise Inventory Merchandise Inventory Income Summary

Page 1 Post Ref.

Debit

Credit

53,000.00 53,000.00 43,800.00 43,800.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Understanding NOTES: 3 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 69. Prepare the cost of goods sold section of the income statement for L. I. Grill from the information given below: Merchandise Inventory, January 1, 20-Merchandise Inventory, December 31, 20-Purchases Purchases Returns and Allowances Purchases Discounts Freight-In

$57,700 48,300 98,000 6,100 8,175 1,100

ANSWER: L. I. Grill Income Statement (partial) For the year ended December 31, 20-Cost of Goods Sold: Merchandise inventory, January 1 Purchases Less: Purchases returns and allowances Purchases discounts Net purchases Add freight-in Cost of goods purchased Goods available for sale Less: Merchandise inventory, December 31 Cost of goods sold POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Understanding NOTES: 4 min.

$ 57,700 $98,000 $6,100 8,175

14,275 $83,725 1,100 84,825 $142,525 48,300 $ 94,225

70. The trial balance for December 31, 20-- has been entered below on the partial work sheet for Camping Supply Center. Required: 1. Complete the Adjustments columns using the following year-end adjustments information. Identify each adjustment with its corresponding letter. a./b. Based on a physical count, it was determined that merchandise inventory costing $21,700 is on hand as of December 31, 20--. c. Supplies remaining at the end of the year, $6,300. d. Unexpired insurance on hand at the end of the year, $2,200. e. Depreciation expense on the store equipment, $2,500. f. Depreciation expense on the building, $2,700. g. Unearned Rental Revenue as of December 31, $3,200. h. Wages earned but not yet paid, $660. 2. Complete the Adjusted Trial Balance columns of the work sheet. 3. Journalize the adjusting entries. Cengage Learning Testing, Powered by Cognero

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business Camping Supply Center Work Sheet (partial) For the year ended December 31, 20-Account Title

Adjusted Trial Trial Balance Adjustments Balance Debit Credit Debit Credit Debit Credit 38,400 10,200 30,720 8,520 5,760 25,560

Cash Accounts Receivable Merchandise Inventory Supplies Prepaid Insurance Store Equipment Accumulated Depreciation— Store Equipment 8,520 Building 60,000 Accumulated Depreciation—Building 12,000 Land 54,000 Accounts Payable 6,720 Wages Payable Sales Tax Payable 5,040 Mortgage Payable 86,400 Unearned Rental Revenue 7,500 Willie Kaplin, Capital 109,800 Willie Kaplin, Drawing 28,560 Income Summary Sales 118,440 Sales Returns and Allowances 2,952 Earned Rental Revenue Purchases 37,920 Purchases Returns and Allowances 5,064 Wages Expense 45,120 Telephone Expense 2,112 Supplies Expense Insurance Expense Utilities Expense 9,660 Depreciation Expense—Store Equipment Depreciation Expense—Building ______________ 359,484 359,484 ANSWER:

Camping Supply Center Work Sheet (partial) For the year ended December 31, 20Cengage Learning Testing, Powered by Cognero

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business Account Title Cash Accounts Receivable Merchandise Inventory Supplies Prepaid Insurance Store Equipment Accumulated Depreciation— Store Equipment Building Accumulated Depreciation—Building Land Accounts Payable Wages Payable Sales Tax Payable Mortgage Payable Unearned Rental Revenue Willie Kaplin, Capital Willie Kaplin, Drawing Income Summary Sales Sales Returns and Allowances Earned Rental Revenue Purchases Purchases Returns and Allowances Wages Expense Telephone Expense Supplies Expense Insurance Expense Utilities Expense Depreciation Expense—Store Equipment Depreciation Expense—Building

Adjusted Trial Trial Balance Adjustments Balance Debit Credit Debit Credit Debit Credit 38,400 38,400 10,200 10,200 30,720 b)21,700 a)30,720 21,700 8,520 c) 2,220 6,300 5,760 d) 3,560 2,200 25,560 25,560

8,520

e) 2,500

60,000

11,020 60,000

12,000

f) 2,700

54,000

14,700 54,000

6,720

6,720 660 5,040 86,400 3,200 109,800

h) 660 5,040 86,400 7,500g) 4,300 109,800 28,560

28,560 a)30,720 b)21,700 30,720 21,700 118,440 118,440

2,952

2,952 g) 4,300

37,920

4,300 37,920

5,064 45,120 2,112

5,064 h) 660 c) 2,220 d) 3,560

9,660 e) 2,500

45,780 2,112 2,220 3,560 9,660 2,500

f) 2,700 2,700 359,484 359,484 68,360 68,360 387,044 387,044

GENERAL JOURNAL

Page 1 Post

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business Description ADJUSTING ENTRIES Dec. 31 Income Summary Merchandise Inventory Date

Ref.

Debit 30,720.00

30,720.00

31 Merchandise Inventory Income Summary

21,700.00

31 Supplies Expense Supplies

2,220.00

31 Insurance Expense Prepaid Insurance

3,560.00

31 Depreciation Expense—Store Equipment Accumulated Depreciation—Store Equipment

Credit

21,700.00

2,220.00

3,560.00

2,500.00 2,500.00

31 Depreciation Expense—Building Accumulated Depreciation— Building

2,700.00

31 Unearned Rental Revenue Earned Rental Revenue

4,300.00

31 Wages Expense Wages Payable

660.00

2,700.00

4,300.00

660.00

POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.60 - LO: 14-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Understanding NOTES: 25 min. 71. The adjusted trial balance for Sunrise Plantation has been provided on the work sheet below. Complete the Income Statement and Balance Sheet columns and determine the amount of net income for the year. Total and rule the work sheet properly.

Sunrise Plantation Work Sheet (partial) For the year ended December 31, 20Adjusted Trial Income Cengage Learning Testing, Powered by Cognero

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business

Account Title Cash Accounts Receivable Merchandise Inventory Prepaid Insurance Store Equipment Accumulated Depreciation— Store Equipment Building Accumulated Depreciation—Building Land Accounts Payable Wages Payable Mortgage Payable Unearned Rental Revenue M. Patton, Capital M. Patton, Drawing Income Summary Sales Sales Returns and Allowances Earned Rental Revenue Purchases Purchases Returns and Allowances Wages Expense Supplies Expense Insurance Expense Utilities Expense Depreciation Expense— Store Equipment Depreciation Expense—Building

Balance Statement Balance Sheet Debit Credit Debit Credit Debit Credit 25,300 9,800 19,600 2,300 18,600 7,300 41,400 27,800 25,600 11,800 600 31,600 1,800 79,000 20,400 19,800

19,600 77,200

2,700 2,500 26,300 4,600 34,100 3,500 2,100 4,900 3,600 3,800_______ 263,800 263,800

ANSWER:

Account Title Cash Accounts Receivable Merchandise Inventory Cengage Learning Testing, Powered by Cognero

Sunrise Plantation Work Sheet (partial) For the year ended December 31, 20Adjusted Trial Income Balance Statement Debit Credit Debit Credit 25,300 9,800 19,600

Balance Sheet Debit Credit 25,300 9,800 19,600 Page 37

Chapter 14—Adjustments and the Work Sheet for a Merchandising Business Prepaid Insurance Store Equipment Accumulated Depreciation— Store Equipment Building Accumulated Depreciation—Building Land Accounts Payable Wages Payable Mortgage Payable Unearned Rental Revenue M. Patton, Capital M. Patton, Drawing Income Summary Sales Sales Returns and Allowances Earned Rental Revenue Purchases Purchases Returns and Allowances Wages Expense Supplies Expense Insurance Expense Utilities Expense Depreciation Expense— Store Equipment Depreciation Expense— Building

2,300 18,600

2,300 18,600 7,300

7,300

41,400

41,400 27,800

27,800

25,600

25,600 11,800 600 31,600 1,800 79,000

20,400 19,800

11,800 600 31,600 1,800 79,000 20,400

19,600 19,800 77,200

2,700

19,600 77,200

2,700 2,500

26,300

2,500 26,300

4,600

34,100 3,500 2,100 4,900

3,600

3,800_______ 3,800_____________________ 263,800 263,800 100,800 103,900 163,000 159,900

Net income

3,100______________ 3,100 103,900 103,900 163,000 163,000

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.60 - LO: 14-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Understanding NOTES: 20 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 72. Sales Discounts is an example of a(n) ____________________ account. ANSWER: contra-revenue POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-07-Adjusting Entries KEYWORDS: Bloom's: Remembering NOTES: 1 min. 73. Unearned Revenue is reported as a(n) ____________________ on the balance sheet. ANSWER: liability POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 74. When goods on hand are actually counted, a(n) ____________________ has been taken. ANSWER: physical inventory POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.58 - LO: 14-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business 75. Purchases Returns and Allowances and Purchases Discounts are examples of ____________________ accounts. ANSWER: contra-cost POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 14—Adjustments and the Work Sheet for a Merchandising Business Match the terms with the definitions. a. contra-cost accounts b. contra-revenue accounts c. physical inventory d. unearned revenue DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.58 - LO: 14-1 COLL.HEIN.17.59 - LO: 14-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-17-Inventories Reporting ACBSP: APC-04-Cash vs. Accrual ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min. 76. A physical count of goods on hand. ANSWER: c POINTS: 1 77. Accounts that are deducted from the Purchases account when computing cost of goods sold (i.e., Purchases Returns and Allowances, Purchases Discounts). ANSWER: a POINTS: 1 78. Cash received in advance of delivering a product or performing a service. ANSWER: d POINTS: 1 79. Accounts that are deducted from Sales on the income statement (i.e., Sales Returns and Allowances, Sales Discounts). ANSWER: b POINTS: 1

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 1. A primary purpose of the work sheet is to serve as an aid in the preparation of the financial statements. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.63 - LO: 15-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. The ending balance for merchandise inventory is reported on the balance sheet as a noncurrent asset. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.64 - LO: 15-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 3. The purpose of an income statement is to summarize the results of operations during an accounting period a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.63 - LO: 15-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 4. The single-step form of income statement lists all revenue items and their totals first, followed by all expense items and their totals, to produce a difference that is either net income or net loss. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.63 - LO: 15-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 5. The multiple-step form of income statement shows operating income separate from other revenue and other expenses. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.63 - LO: 15-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. Gross sales less sales returns and allowances is called net sales. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.63 - LO: 15-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 7. Net sales less cost of goods sold is called gross profit. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.63 - LO: 15-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. Current assets are listed on the balance sheet from the most liquid to least liquid. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 9. Gross profit less operating expenses produces the income from operations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.63 - LO: 15-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 10. The statement of owner's equity summarizes all changes in the owner's equity during the period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.64 - LO: 15-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 11. A formal statement of the changes in owner's equity during an accounting period is called a statement of financial position. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.64 - LO: 15-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. The purpose of a balance sheet is to summarize the results of operations during an accounting period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 13. Assets that are expected to be used for more than one year in an operation of a business are called property, plant, and equipment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. Current assets include cash and all other assets that may be reasonably expected to be converted into cash or consumed within one year or the normal operating cycle of the business, whichever is longer. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 15. Liquidity refers to the speed with which the assets can be converted to cash. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 16. Assets that are used in the operation of a business are called temporary investments. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 17. Working capital is the difference between current assets and current liabilities. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. The cost of a building less its accumulated depreciation represents the undepreciated cost. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 19. Undepreciated cost is the same as the book value of an asset. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. Current liabilities are those obligations that are due within one year or the normal operating cycle of the business, whichever is longer, and which will require use of current assets. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 21. Current liabilities include those obligations that will extend beyond one year or the normal operating cycle, whichever is longer. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 22. Long-term liabilities are obligations that will extend beyond one year or the normal operating cycle, whichever is longer. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 23. A mortgage payable is a written agreement specifying that if the borrower does not repay a debt, the lender has the right to take over the property to satisfy the debt. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. The difference between current assets and current liabilities represents the amount of capital the firm has to work with for current operations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 25. Working capital is the amount of capital the firm has to work with for current operations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. Quick assets include cash and other noncurrent assets that can be converted into cash quickly. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 27. The ability of a business to meet its current obligations may be evaluated with the return on owner's equity ratio. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 28. The current ratio is determined by subtracting current liabilities from current assets. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 29. The quick ratio is determined by subtracting current liabilities from quick assets. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. A quick ratio of 1.5 to 1 indicates that quick assets are more than adequate to meet current obligations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 31. Return on owner's equity is the ratio of net income to average owner's equity in the business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. The number of times the accounts receivable turned over or were collected during the accounting period is called net credit sales for the period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 33. Inventory turnover is determined by dividing cost of goods sold for the period by the ending inventory. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 34. If inventory is taken only at the end of each accounting period, the average inventory for the period can be calculated by adding the beginning and the ending inventories and dividing their sum by two. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 35. Entries required at the end of an accounting period to bring certain account balances up-to-date are known as adjusting entries. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.67 - LO: 15-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. The purpose of the post-closing trial balance is to prove that the general ledger is in balance at the beginning of the new accounting period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.67 - LO: 15-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 37. All adjusting entries should be reversed. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.68 - LO: 15-6 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. Reversing entries make possible the entering of the transactions of the succeeding accounting period in a routine manner. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.68 - LO: 15-6 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 39. The heading on a financial statement includes which of the following information, in the order shown? a. the name of the business, the period of time the statement covers, and the name of the statement b. the name of the statement, the period of time the statement covers, and the name of the business c. the period of time the statement covers, the name of the statement, and the name of the business d. the name of the business, the name of the statement, and the period of time the statement covers ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.63 - LO: 15-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 40. A formal statement of the results of the operation of a business during an accounting period is called a(n) a. statement of owner's equity. b. balance sheet. c. statement of financial position. d. income statement. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.63 - LO: 15-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 41. In a multiple-step income statement, operating expenses are subtracted from gross profit to compute a. income from operations. b. net income. c. other income. d. net loss. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.63 - LO: 15-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 42. Net sales minus cost of goods sold equals a. operating income. b. operating expenses. c. other expenses. d. gross profit. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.63 - LO: 15-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 43. Accumulated depreciation amounts are shown as deductions from the a. cost of building and equipment accounts. b. accounts receivable account. c. accounts payable account. d. prepaid insurance account. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.64 - LO: 15-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 44. A formal statement of the assets, liabilities, and owner's equity of a business at a specified date is known as a(n) a. balance sheet. b. income statement. c. statement of owner's equity. d. statement of cash flows. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 45. Cash and all other assets that may be reasonably expected to be converted to cash or consumed within one year or the normal operating cycle of the business are classified as a. temporary investments. b. marketable securities. c. current assets. d. investments. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 46. Assets that are used for several years in the operation of a business are called a. marketable securities. b. current assets. c. investments. d. property, plant, and equipment. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 47. Those obligations that are due within one year or the normal operating cycle of the business and will be paid with money provided by the current assets are called a. investments. b. marketable securities. c. current liabilities. d. long-term liabilities. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 48. The following information was taken from the financial statements of Ashley's Linens: Total current assets Property, plant, and equipment Current liabilities Long-term liabilities Owner's equity Beginning inventory Ending inventory Cost of goods sold Net income

$ 53,000 6,000 21,000 4,000 34,000 31,000 33,000 152,000 42,000

The working capital of Ashley's Linens is a. $32,000. b. $33,000. c. $34,000. d. $38,000. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 49. The ability of a business to meet its current obligations may be determined by the a. current ratio. b. inventory turnover. c. working ratio. d. accounts receivable turnover. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 50. The following information was taken from the financial statements of Brandon's Motor Shop: Total current assets Property, plant, and equipment Current liabilities Long-term liabilities Owner's equity Beginning inventory Ending inventory Cost of goods sold Net income

$ 53,000 6,000 21,000 4,000 34,000 31,000 33,000 152,000 42,000

The current ratio for Brandon's Motor Shop is closest to a. 1.3 to 1. b. 2.4 to 1. c. 2.5 to 1. d. 1 to 2.5. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 51. The rough "rule of thumb" for a quick ratio is that the ratio should be about a. 2 to 1. b. 1 to 1. c. .1 to 1. d. 1 to .1. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 52. The following information was taken from the financial statements of Collin's Inn: Total current assets Average owner's equity Beginning inventory Ending inventory Cost of goods sold Net income

$162,000 148,000 32,000 36,000 165,000 37,000

The return on owner's equity for Collin's Inn is a. 25%. b. 27%. c. 80%. d. 129%. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 53. The following information was taken from the financial statements of Sunshine City: Total current assets Property, plant, and equipment Current liabilities Long-term liabilities Owner's equity Beginning inventory Ending inventory Cost of goods sold Net income

$ 53,000 6,000 21,000 4,000 34,000 31,000 33,000 152,000 42,000

The inventory turnover (rounded to one decimal place) for Sunshine City is a. 2.2 times. b. 3.0 times. c. 4.8 times. d. 5.0 times. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Page 29

Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 54. The information needed in journalizing the closing entries is obtained from the a. accounts receivable ledger. b. adjusting journal entries. c. work sheet. d. balance sheet. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.67 - LO: 15-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 55. Information needed in journalizing the first three closing entries is obtained from which of the following work sheet columns? a. Trial Balance b. Adjustments c. Adjusted Trial Balance d. Income Statement ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.67 - LO: 15-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 56. Which of the following accounts is used only at the close of the accounting period to adjust the merchandise inventory account and summarize the temporary owner's equity accounts? a. Owner's Capital b. Income Summary c. Cost of Goods Sold d. Sales ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.67 - LO: 15-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 57. The entries that transfer the balances of the temporary owner's equity accounts to the permanent owner's equity account are called a. adjusting entries. b. closing entries. c. reversing entries. d. general journal entries. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.67 - LO: 15-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 58. The third step in the closing process is to transfer the balance in which of the following accounts to the permanent owner's equity account? a. Revenue b. Expense c. Income Summary d. Owner's Capital ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.67 - LO: 15-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 59. After the temporary owner's equity and drawing accounts are transferred to the permanent owner's equity account, which of the following accounts will have a balance? a. Expenses b. Revenues c. Owner's Capital d. Income Summary ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.67 - LO: 15-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 60. Closing entries are made in the a. sales journal. b. purchases journal. c. general journal. d. cash receipts journal. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.67 - LO: 15-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 61. Which of the following serves as an end-of-period accuracy check? a. statement of owner's equity b. income statement c. balance sheet d. post-closing trial balance ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.67 - LO: 15-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 62. A trial balance of the general ledger accounts taken after the temporary owner's equity accounts have been closed is usually referred to as a a. post-closing trial balance. b. new accounting period trial balance. c. pre-closing trial balance. d. subsidiary trial balance. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.67 - LO: 15-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 63. Adjusting entries are made in the a. sales journal. b. general journal. c. cash receipts journal. d. cash payments journal. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.68 - LO: 15-6 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 64. Reversing entries are made in the a. general journal. b. sales journal. c. purchases journal. d. cash receipts journal. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.68 - LO: 15-6 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 65. The Income Statement and Balance Sheet columns below are from the work sheet of the Mandle Company for the year ended December 31, 20--. Mandle Company Work Sheet (partial) For the year ended December 31, 20-Income Statement Account Title Debit Credit Cash Accounts Receivable Merchandise Inventory Store Supplies Office Supplies Prepaid Insurance Store Equipment Accumulated Depreciation— Store Equipment Office Equipment Accumulated Depreciation— Office Equipment Accounts Payable Salaries Payable Long-Term Notes Payable H. Mandle, Capital H. Mandle, Drawing Income Summary Sales Sales Returns and Allowances Cengage Learning Testing, Powered by Cognero

Balance Sheet Debit Credit 24,000 12,500 8,000 550 1,200 750 33,000 19,000 9,000 5,000 9,900 200 18,000 45,300 16,000

8,500

8,000 31,000

250 Page 35

Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business Purchases Purchases Returns and Allowances Purchases Discounts Sales Salary Expense (selling) Office Salary Expense (general) Store Supplies Expense (selling) Office Supplies Expense (general) Insurance Expense (general) Depreciation Expense— Store Equipment (selling) Depreciation Expense— Office Equipment (general) Net Income

13,500 350 200 4,600 3,500 150 200 400 400 450 ______ _______ ______ 31,950 39,550 105,000 97,400 7,600 ______ _______ 7,600 39,550 39,550 105,000 105,000

Required: Prepare a multi-step income statement for Mandle Company for the current fiscal year. Include separate sections for selling expenses and general expenses under the heading "Operating Expenses" by using the classifications provided in the Account Title column of the work sheet. ANSWER: Mandle Company Income Statement For the year ended December 31, 20-Revenue: Sales Less: Sales returns and allowances Net sales Cost of goods sold: Merchandise inventory, January 1, 20-Purchases Less: Purchases returns and allowances Purchases discounts Net purchases Goods available for sale Less: Merchandise inventory, December 31, 20-Cost of goods sold Gross profit Operating expenses: Selling expenses: Sales salary expense Store supplies expense Depreciation expense—store equipment Total selling expenses General expenses: Office salary expense Cengage Learning Testing, Powered by Cognero

$31,000 250 $30,750 $ 8,500 $13,500 $350 200

550 12,950 $21,450 8,000 13,450 $17,300

$ 4,600 150 400 $ 5,150 $ 3,500 Page 36

Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business Office supplies expense Insurance expense Depreciation expense—office equipment Total general expenses Total operating expenses Net income POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.67 - LO: 15-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Applying NOTES: 20 min.

200 400 450 4,550 9,700 $ 7,600

66. The following adjusted trial balance was taken from the work sheet of Babylon Lighting. Assume the owner, Jillian Johnson, made no additional investments during the year. Babylon Lighting Adjusted Trial Balance December 31, 20-Account Title Cash Accounts Receivable Merchandise Inventory Store Supplies Office Supplies Prepaid Insurance Store Equipment Accumulated Depreciation—Store Equipment Office Equipment Accumulated Depreciation—Office Equipment Accounts Payable Salaries Payable Mortgage Payable (Current portion: $1,200) Jillian Johnson, Capital Jillian Johnson, Drawing Income Summary Sales Sales Discounts Purchases Purchases Returns and Allowances Purchases Discounts Sales Salary Expense Office Salary Expense Cengage Learning Testing, Powered by Cognero

Debit 29,900 55,200 42,600 1,180 400 1,200 37,000

Credit

5,000 15,000 3,600 27,300 1,340 29,600 104,480 8,600 46,600

42,600 106,600

1,600 61,800 3,000 2,400 13,600 7,600 Page 37

Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business Advertising Expense Store Supplies Expense Office Supplies Expense Insurance Expense Depreciation Expense—Store Equipment Depreciation Expense—Office Equipment

800 600 480 260 1,000 500 325,920

_______ 325,920

Required: Prepare a classified balance sheet for Babylon Lighting as of December 31, 20--. ANSWER: Babylon Lighting Balance Sheet December 31, 20-Assets Current assets: Cash Accounts receivable Merchandise inventory Store supplies Office supplies Prepaid insurance Total current assets Property, plant, and equipment: Store equipment Less: accumulated depreciation—store equipment Office equipment Less: accumulated depreciation—office equipment Total property, plant, and equipment Total assets Liabilities Current liabilities: Accounts payable Salaries payable Mortgage payable (current portion) Total current liabilities Long-term liabilities: Mortgage payable (excluding current amount) Total liabilities

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Owner's Equity Jillian Johnson, capital Total liabilities and owner's equity 1

$29,900 55,200 42,600 1,180 400 1,200 $130,480 $37,000 5,000

$32,000

$15,000 3,600

11,400 43,400 $173,880

$27,300 1,340 1,200 $29,840 28,400 $ 58,240

115,640 $173,880

Page 38

Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Applying NOTES: 20 min. 67. The Income Statement and Balance Sheet columns below are from the work sheet of Bleeker Street Bounty for the year ended December 31, 20--. Required: Using the work sheet, compute (a) total current assets, (b) working capital, (c) current ratio, and (d) accounts receivable turnover. (Accounts receivable balance on January 1, 20-- was $23,200). Round to 2 decimal places. All sales are on account. Bleeker Street Bounty Work Sheet (partial) For the year ended December 31, 20-Income Statement Account Title Debit Credit Cash Accounts Receivable Merchandise Inventory Store Supplies Office Supplies Prepaid Insurance Store Equipment Accumulated Depreciation—Store Equipment Office Equipment Accumulated Depreciation—Office Equipment Accounts Payable Salaries Payable Long-Term Notes Payable Carlo Perez, Capital Carlo Perez, Drawing Income Summary Sales Sales Returns and Allowances Purchases Purchases Returns and Allowances Purchases Discounts Sales Salary Expense (selling) Office Salary Expense (general) Store Supplies Expense (selling) Cengage Learning Testing, Powered by Cognero

17,000

Balance Sheet Debit Credit 12,300 25,000 16,000 1,100 600 1,500 66,000 38,000 18,000 10,000 22,300 400 36,000 50,600 32,000

16,000 61,500

500 23,000 700 400 9,200 10,500 300 Page 39

Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business Office Supplies Expense (general) Insurance Expense (general) Depreciation Expense—Store Equipment (selling) Depreciation Expense—Office Equipment (general) Net Income

ANSWER:

400 800 800 900 63,400 15,200 78,600

______ 78,600 ______ 78,600

______ 172,500 ______ 172,500

______ 157,300 15,200 172,500

Cash Accounts receivable Merchandise inventory Store supplies Office supplies Prepaid insurance Total current assets

$12,300 25,000 16,000 1,100 600 1,500 $56,500

Current assets Less: Current liabilities Working capital

$56,500 22,700 $33,800

Current assets ÷ Current liabilities = Current ratio $56,500 ÷ $22,700 = 2.49 to 1 Sales Less: Sales returns and allowances Net credit sales

$61,500 500 $61,000

Beginning accounts receivable Ending accounts receivable Average accounts receivable

$23,200 25,000 $48,200÷ 2 = $24,100

Net credit sales ÷ Average accounts receivable = Accounts receivable turnover $61,000 ÷ $24,100 = 2.53 times POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Applying NOTES: 15 min. Cengage Learning Testing, Powered by Cognero

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 68. The work sheet for Babson's Seafood, a business owned by B. B. Babson, is provided. Year-end adjustments have been made and all required entries journalized and posted to the ledger accounts. From the work sheet, prepare a multiple-step income statement, a statement of owners' equity (assuming no additional investments), and a classified balance sheet. The current year's portion of the mortgage payable is $6,000. Babson's Seafood Work Sheet (partial) For the year ended December 31, 20-Account Title

Trial Balance

Adjusted Trial Balance Credit Debit Credit 60,000

Adjustments

Debit Credit Debit Cash 60,000 Accounts 36,000 Receivable Merchandise 50,000 60,000 Inventory Supplies 23,200 Prepaid Insurance 9,000 Building 107,000 Accumulated Depreciation— Building 30,000 Equipment 70,000 Accumulated Depreciation— Equipment 28,000 Accounts Payable 32,200 Wages Payable Unearned Revenue 16,000 11,000 Mortgage Payable 107,000 B. B. Babson, Capital 110,500 B. B. Babson, 40,000 Drawing Income Summary 50,000 Sales 228,000 Sales Returns and Allowances 3,500 Earned Revenue Purchases 54,000 Purchases Returns and Allowances 6,400 Wages Expense 78,000 1,100 Supplies Expense 16,000 Depreciation Expense—Building 7,000 Cengage Learning Testing, Powered by Cognero

> > >

36,000

50,000

60,000

16,000 4,000

7,200 5,000 107,000

> > > >

7,000

37,000 >

70,000

> 6,000

34,000 32,200 > 1,100 > 5,000 > 107,000 >

1,100

110,500

60,000

40,000

50,000

60,000 > 228,000 > >

3,500 11,000 54,000

11,000 > > > 6,400

79,100 16,000 7,000

> > > Page 41

Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business Depreciation Expense— Equipment Insurance Expense Utilities Expense Miscellaneous Expense Net Income

< < < < < < <

> 6,000 4,000 20,000

Income Statement Debit Credit

Balance Sheet Debit Credit 60,000 36,000 60,000 7,200 5,000 107,000 37,000

70,000

< < <

34,000 32,200 1,100 5,000 107,000 110,500 40,000 50,000

< < < <

60,000 228,000

3,500 11,000 54,000

< < <

> >

> 7,400 _______ _______ _______ 7,400 _______ 558,100 558,100 155,100 155,100 632,200 632,200 > > >

< < < < < < < <

6,000 4,000 20,000

6,400 79,100 16,000 7,000 6,000 4,000 20,000

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business < < < < <

7,400 247,000 58,400 305,400

_______ 305,400 _______ 305,400

_______ 385,200 _______ 385,200

_______ 326,800 58,400 385,200

ANSWER: Babson's Seafood Income Statement For the year ended December 31, 20-Revenue: Sales Less: Sales returns and allowances Net sales Cost of goods sold: Merchandise inventory, January 1, 20-Purchases Less: Purchases returns and allowances Cost of goods purchased Goods available for sale Less: Merchandise inventory, December 31, 20-Cost of goods sold Gross profit Operating expenses: Wages expense Supplies expense Depreciation expense—building Depreciation expense—equipment Insurance expense Utilities expense Miscellaneous expense Total operating expenses Income from operations Other revenues: Earned revenue Net income

$228,000 3,500 $224,500 $ 50,000 $54,000 6,400 47,600 $ 97,600 60,000 37,600 $186,900 $ 79,100 16,000 7,000 6,000 4,000 20,000 7,400

Babson's Seafood Statement of Owner's Equity For the year ended December 31, 20-B. B. Babson, capital, January 1, 20-Net income for the year $58,400 Less withdrawals for the year 40,000 Increase in capital B. B. Babson, capital, December 31, 20--

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139,500 $ 47,400 11,000 $ 58,400

$110,500

18,400 $128,900

Page 43

Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business Babson's Seafood Balance Sheet December 31, 20-Assets Current assets: Cash Accounts receivable Merchandise inventory Supplies Prepaid insurance Total current assets Property, plant, and equipment: Building Less: accumulated depreciation— building Equipment Less: accumulated depreciation— equipment Total property, plant, and equipment Total assets Liabilities Current liabilities: Accounts payable Wages payable Unearned revenue Mortgage payable (current portion) Total current liabilities Long-term liabilities: Mortgage payable (excluding current amount) Total liabilities Owner's Equity B. B. Babson, capital Total liabilities and owner's equity POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.63 - LO: 15-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Applying NOTES: 30 min.

$60,000 36,000 60,000 7,200 5,000 $168,200 $107,000 37,000

$70,000

$ 70,000 34,000

36,000 106,000 $274,200

$32,200 1,100 5,000 6,000 $ 44,300 101,000 $145,300

128,900 $274,200

69. The Income Statement and Balance Sheet columns below are from the work sheet of a merchandising firm, J. D. Cengage Learning Testing, Powered by Cognero

Page 44

Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business Enterprise, for the year ended December 31, 20--.

Required: Prepare the closing entries for the merchandising firm. J. D. Enterprise Work Sheet (partial) For the year ended December 31, 20-Account Title Income Statement Debit Credit Cash Accounts Receivable Merchandise Inventory Store Supplies Office Supplies Prepaid Insurance Store Equipment Accumulated Depreciation—Store Equipment Office Equipment Accumulated Depreciation—Office Equipment Accounts Payable Salaries Payable Long-Term Notes Payable J. D. Allen, Capital J. D. Allen, Drawing Income Summary Sales Sales Returns and Allowances Purchases Purchases Returns and Allowances Purchases Discounts Sales Salary Expense (selling) Office Salary Expense (general) Store Supplies Expense (selling) Office Supplies Expense (general) Insurance Expense (general) Depreciation Expense—Store Equipment (selling) Depreciation Expense—Office Equipment (general) Net Income

8,500

Balance Sheet Debit Credit 4,000 12,500 8,000 550 300 750 33,000 19,000 9,000 5,000 9,000 200 18,000 25,300 16,000

8,000 29,900

250 11,500 350 200 4,600 3,500 650 475 525 400 450 30,850 7,600 38,450

______ 38,450 ______ 38,450

______ 84,100 ______ 84,100

______ 76,500 7,600 84,100

ANSWER: GENERAL JOURNAL Cengage Learning Testing, Powered by Cognero

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business

Description CLOSING ENTRIES

Date

Dec. 31 Sales Purchases Returns and Allowances Purchases Discounts Income Summary 31 Income Summary

Post Ref.

Debit

Credit

29,900.00 350.00 200.00 30,450.00 22,350.00

Sales Returns and Allowances Purchases Sales Salary Expense Office Salary Expense Store Supplies Expense Office Supplies Expense Insurance Expense Depreciation Expense—Store Equipment Depreciation Expense—Office Equipment 31 Income Summary

250.00 11,500.00 4,600.00 3,500.00 650.00 475.00 525.00 400.00 450.00 7,600.00

J. D. Allen, Capital

7,600.00

31 J. D. Allen, Capital

16,000.00

J. D. Allen, Drawing

16,000.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Applying NOTES: 20 min. 70. The adjusting entries for Down Town Cafe are shown in journal form below. Journalize the reversing entries as of March 1. GENERAL JOURNAL

Description ADJUSTING ENTRIES Mar. 31 Income Summary Date

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Page 1 Post Ref.

Debit

Credit

32,700.00 Page 46

Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business Merchandise Inventory

32,700.00

31 Merchandise Inventory Income Summary

21,300.00

31 Supplies Expense Supplies

1,500.00

31 Insurance Expense Prepaid Insurance

1,125.00

21,300.00

1,500.00

1,125.00

Depreciation Expense—Office Equipment Accumulated Depreciation— Office Equipment

824.00 824.00

31 Wages Expense Wages Payable

515.00

31 Unearned Subscriptions Revenue Subscriptions Revenue

677.00

515.00

677.00

ANSWER: GENERAL JOURNAL

Date Apr.

Description REVERSING ENTRIES 1 Wages Payable Wages Expense

Page 1 Post Ref.

Debit

Credit

515.00 515.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.68 - LO: 15-6 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Applying NOTES: 15 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 71. Net sales minus cost of goods sold equals ____________________. ANSWER: gross profit POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.63 - LO: 15-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 72. ____________________ are the number of days in the year divided by the inventory turnover. ANSWER: Average days to sell inventory POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 73. The ____________________ shows a step-by-step calculation of net sales, cost of goods sold, gross profit, operating expenses, income from operations, other revenues and expenses, and net income. ANSWER: multiple-step income statement POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.63 - LO: 15-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 74. Gross sales less sales returns and allowances and sales discounts equals ____________________. ANSWER: net sales POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.63 - LO: 15-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 75. ____________________ are obligations that will extend beyond one year or the normal operating cycle, whichever is longer. ANSWER: Long-term liabilities POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 76. The difference between current assets and current liabilities is called ____________________. ANSWER: working capital POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 77. The resulting balance in the ____________________ account is transferred to the owner's capital account. ANSWER: income summary POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.67 - LO: 15-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 78. A(n) ____________________ is taken after the temporary owner's equity accounts have been closed. ANSWER: post-closing trial balance POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 79. ____________________ compares the relationship between certain amounts in the income statement and balance sheet. ANSWER: Interstatement analysis POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 80. Operating expenses are subtracted from gross profit to compute ____________________. ANSWER: income from operations POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.63 - LO: 15-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 81. Cash and all other current assets that can be converted into cash quickly are known as ____________________. ANSWER: quick assets POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 82. Assets that are expected to be used for more than one year in the operation of a business are classified as ____________________. ANSWER: property, plant, and equipment POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 83. The number of times the merchandise inventory turned over, or was sold, during the accounting period is called the ____________________. ANSWER: inventory turnover POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 84. The number of times the accounts receivable turned over, or were collected, during the accounting period is called the ____________________. ANSWER: accounts receivable turnover POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 85. Cash and all other assets expected to be converted into cash or consumed within one year or the normal operating cycle of the business, whichever is longer, are called ____________________. ANSWER: current assets POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 86. Net income divided by average owner's equity equals ____________________. ANSWER: return on owner's equity POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 87. A(n) ____________________ is a written agreement specifying that if the borrower does not repay a debt, the lender has the right to take over specific property to satisfy the debt. ANSWER: mortgage POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 88. The ____________________ is the length of time generally required for a business to buy inventory, sell it, and collect the cash. ANSWER: operating cycle POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.63 - LO: 15-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 89. ____________________ refers to the speed with which an asset can be converted to cash. ANSWER: Liquidity POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 90. The cost of plant and equipment less accumulated depreciation equals the ____________________. ANSWER:

book value undepreciated cost POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 91. The balance in the owner's drawing account is transferred to the ____________________ account. ANSWER: owner's capital POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.67 - LO: 15-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 92. The ____________________ lists all revenue items and their total first, followed by all expense items and their total. ANSWER: single-step income statement POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.63 - LO: 15-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 93. Current assets divided by current liabilities equals the ____________________. ANSWER: current ratio POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 94. ____________________ are those obligations that are due within one year or the normal operating cycle of the business, whichever is longer, and will require the use of current assets. ANSWER: Current liabilities POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 95. The ____________________ is(are) the number of days in the year divided by the accounts receivable turnover. ANSWER: average collection period POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 96. The ____________________ is equal to quick assets divided by current liabilities. ANSWER: quick ratio POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 97. A(n) ____________________ is the reverse or opposite of the adjusting entry. ANSWER: reversing entry POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.65 - LO: 15-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. selling expenses b. quick assets c. average days to sell inventory Cengage Learning Testing, Powered by Cognero

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business d. book value e. property, plant, and equipment f. operating cycle g. quick ratio h. general expenses i. gross profit j. net sales k. multiple-step income statement l. inventory turnover m. liquidity DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.63 - LO: 15-1 COLL.HEIN.17.65 - LO: 15-3 COLL.HEIN.17.66 - LO: 15-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 98. Those expenses associated with administrative or office operating expenses. ANSWER: h POINTS: 1 99. Refers to the speed with which an asset can be converted to cash. ANSWER: m POINTS: 1 100. Net sales minus cost of goods sold. ANSWER: i POINTS: 1 101. Cash and all other current assets that can be converted into cash quickly. ANSWER: b POINTS: 1 102. Cost of plant and equipment less the accumulated depreciation amounts. ANSWER: d POINTS: 1

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 103. The number of days in the year divided by the inventory turnover. ANSWER: c POINTS: 1 104. Those expenses directly associated with selling activities. ANSWER: a POINTS: 1 105. The length of time generally required for a business to buy inventory, sell it, and collect the cash. ANSWER: f POINTS: 1 106. This statement shows a step-by-step calculation of net sales, cost of goods sold, gross profit, operating expenses, income from operations, other revenues and expenses, and net income. ANSWER: k POINTS: 1 107. Assets that are expected to be used for more than one year in the operation of a business. ANSWER: e POINTS: 1 108. Gross sales less sales returns and allowances and sales discounts. ANSWER: j POINTS: 1 109. The number of times the merchandise inventory turned over, or was sold, during the accounting period. ANSWER: l POINTS: 1 110. Quick assets divided by current liabilities. ANSWER: g POINTS: 1 Match the terms with the definitions. a. accounts receivable turnover b. average collection period c. reversing entry d. return on owner's equity e. current assets f. current liabilities g. current ratio h. post-closing trial balance i. Mortgage Payable j. income from operations Cengage Learning Testing, Powered by Cognero

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business k. interstatement analysis l. mortgage m. long-term liabilities DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.63 - LO: 15-1 COLL.HEIN.17.65 - LO: 15-3 COLL.HEIN.17.66 - LO: 15-4 COLL.HEIN.17.68 - LO: 15-6 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP ACBSP: APC-09-Financial Statements KEYWORDS: Bloom's: Remembering NOTES: 1 min. 111. Those obligations that will extend beyond one year or the normal operating cycle, whichever is longer. ANSWER: m POINTS: 1 112. The number of times the accounts receivable turned over, or were collected, during the accounting period. ANSWER: a POINTS: 1 113. Those obligations that are due within one year or the normal operating cycle of the business, whichever is longer, and will require the use of current assets. ANSWER: f POINTS: 1 114. Cash and all other assets expected to be converted into cash or consumed within one year or the normal operating cycle of the business, whichever is longer. ANSWER: e POINTS: 1 115. The number of days in the year divided by the accounts receivable turnover. ANSWER: b POINTS: 1 116. The opposite of the adjusting entry. It is made on the first day of the next accounting period and simplifies recording transactions in the new period. ANSWER: c POINTS: 1

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Chapter 15—Financial Statements and YearEnd Accounting for a Merchandising Business 117. Net income divided by average owner's equity. ANSWER: d POINTS: 1 118. Current assets divided by current liabilities. ANSWER: g POINTS: 1 119. A trial balance taken after the temporary owner's equity accounts have been closed. ANSWER: h POINTS: 1 120. A written agreement specifying that if the borrower does not repay a debt, the lender has the right to take over specific property to satisfy the debt. ANSWER: l POINTS: 1 121. An account that is used to reflect an obligation that is secured by a mortgage on certain property. ANSWER: i POINTS: 1 122. Compares the relationship between certain amounts in the income statement and balance sheet. ANSWER: k POINTS: 1 123. Gross profit minus operating expenses on a multiple-step income statement. ANSWER: j POINTS: 1

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Chapter 16—Accounting for Accounts Receivable 1. Most people tend to buy more if they can "charge it" rather than pay cash. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. Aging the receivables is often referred to as the percentage of sales method. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. The percentage of sales method emphasizes proper estimating and reporting of bad debt expense on the income statement and the matching of expenses with revenues. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 4. Under the accrual basis of accounting, the allowance method is generally required for financial reporting purposes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. The direct write-off method has one advantage it is very simple to apply. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.71 - LO: 16-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. The matching concept states that expenses incurred to produce particular revenues should be matched with those revenues. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 7. The allowance for bad debts account may have a debit balance prior to adjustment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. There are three methods of accounting for uncollectible accounts the direct write-off method, the allowance method, and the reserve method. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. Under the allowance method, the expense associated with an uncollectible account is recognized when it has been determined that a customer will not pay the amount owed. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 10. The expense of extending credit to make a sale should be recognized in the same period as the revenue from the sale. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. When it is possible to make a reasonable estimate of the amount of uncollectible accounts, the allowance method is preferred for financial reporting purposes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. The credit portion of an adjusting entry to enter the estimate for uncollectible accounts can be made directly to a specific receivable account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 16—Accounting for Accounts Receivable 13. The term "net receivables" refers to the difference between Accounts Receivable and Allowance for Bad Debts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. Two basic methods are used for estimating the amount of uncollectibles at the end of the accounting period—the percentage of sales method and the percentage of receivables method. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. Some businesses and individuals who "charge it" are unwilling or unable to "pay for it." a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 16. Under the direct write-off method, the bad debt expense is recognized before it has been determined that an account is uncollectible. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.71 - LO: 16-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. Under the percentage of receivables method, the adjusting entry at the end of the period for bad debt expense is not affected by the current balance in the allowance for bad debts account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. Whenever a company elects to make sales on account, it is inevitable that some receivables will become uncollectible. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 16—Accounting for Accounts Receivable 19. Most firms are able to increase sales by extending credit to customers. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. One method for estimating the amount of uncollectibles involves taking a percentage of sales on account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. The allowance for bad debts account may have a credit balance prior to adjustment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 22. Under the percentage of sales method, the adjusting entry at the end of the period for bad debt expense is affected by the current balance in the allowance for bad debts account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. If actual write-offs are significantly higher or lower than estimated uncollectible accounts over a number of periods, a large debit or credit balance will accumulate in the allowance for bad debts account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. Under the percentage of sales method, the credit sales are analyzed to estimate the amount that will not be collected. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 25. If after taking a percentage of sales on account, it is estimated that $1,000 will not be collected and the allowance account has an existing credit balance of $200, the adjusting entry would be for the amount of $1,200. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. When a large balance accumulates in the allowance for bad debts account, the percentage of sales used to estimate uncollectibles should be modified. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. The percentage of receivables method of estimating uncollectible accounts is based on the relationship between the amount of accounts payable and the amount of uncollectible accounts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 16—Accounting for Accounts Receivable 28. Computing a percentage of accounts receivable is the simplest and most commonly used approach to estimating uncollectible accounts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. In aging the receivables, each customer's balance is analyzed separately to determine how long it has been outstanding. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. The percentage of receivables method is often referred to as aging the receivables. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 31. In aging the receivables, the estimate of uncollectible accounts is based on past experience and increases as the number of days past due increases. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. Once an account has been written off using the direct write-off method, it will not be collected. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.71 - LO: 16-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. If after aging the accounts receivables, it is estimated that $1,800 will not be collected and the allowance account has an existing credit balance of $300, the adjusting entry would be for the amount of $1,500. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 34. If after aging the accounts receivables, it is estimated that $900 will not be collected and the allowance account has an existing debit balance of $200, the adjusting entry would be for the amount of $700. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. Allowance for Bad Debts is a contra-liability account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. The allowance for bad debts account is sometimes referred to as Allowance for Doubtful Accounts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 37. The balance of the allowance for bad debts account after adjustment, using the percentage of sales method, must be equal to the percent of uncollectible accounts multiplied by the amount of credit sales. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. The amount of the year-end adjustment for Allowance for Bad Debts is equal to the aging percent of uncollectible accounts multiplied by the amount of accounts receivable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 39. The direct write-off method is simple to apply. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.71 - LO: 16-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 40. The direct write-off method of determining bad debt expense is subjective and can be manipulated by management. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.71 - LO: 16-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 41. In view of past experience, it is expected there will be a loss due to uncollectible accounts of an amount equal to one-half of one percent of the sales on account during the year. If the sales on account amounted to $250,000, the estimated uncollectible account losses would be a. $25. b. $1,250. c. $2,500. d. $25,000. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 42. The adjusting entry to record an increase in Allowance for Bad Debts involves a. debiting Allowance for Bad Debts and crediting Bad Debt Expense. b. debiting Accounts Receivable and crediting Bad Debt Expense. c. debiting Allowance for Bad Debts and crediting Accounts Receivable. d. debiting Bad Debt Expense and crediting Allowance for Bad Debts. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 43. The accounting concept that states expenses should be recognized in the same period with the revenues they helped to produce is the a. contra-account principle. b. allowance method. c. matching principle. d. uncollectible accounts technique. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-02-GAAP KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 44. One major cost of selling goods on account could be a. cash shortages. b. easy credit. c. accounts payable. d. uncollectible accounts. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 45. Last year, the Tilden Co. had credit sales in the amount of $470,000, and it had uncollectible accounts in the amount of $4,700. Based on last year, what would the percent of estimated uncollectible accounts be this year? a. 10% b. 4% c. 1% d. 4.7% ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 46. Which of the following is a method of accounting for uncollectible accounts? a. reserve method b. allowance method c. allocation method d. accounts receivable method ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 47. The expense associated with an uncollectible account is recognized when it has been determined that a customer will not pay the amount owed under the a. reserve method. b. allowance method. c. allocation method. d. direct write-off method. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 48. Dude Ranch Circle estimates its uncollectible accounts at 1.5% of its credit sales of $825,000. When adjusting for estimated losses from uncollectible accounts, the debit to Bad Debt Expense is a. $82,500. b. $123,750. c. $12,375. d. $8,250. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min. 49. The amounts that cannot be collected from charge customers are called a. Collection Deficiency Expense. b. Bad Debt Expense. c. Loss from Uncollectible Accounts. d. Uncollectible Charges Expense. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 50. When making the current period's adjusting entry under the percentage of sales method, the balance in Allowance for Bad Debts is a. doubled. b. ignored. c. divided in half and this amount is used for the adjustment. d. 30% of the amount to be used for the adjustment. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 51. The allowance for bad debts account is contra to which of the following accounts? a. Revenue b. Cash c. Accounts Receivable d. Bad Debt Expense ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 52. On the balance sheet, any account having a balance intended to be deducted from another related account balance for financial statement purposes is known as a(n) a. expense account. b. discount account. c. contra account. d. uncollectible account. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 53. After aging the accounts receivable, it is estimated that $1,200 will not be collected and the allowance account has an existing credit balance of $400. If the accounts receivable total $130,000, the net receivables would be a. $128,800. b. $129,600. c. $128,400. d. $128,000. ANSWER: a POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 54. Under the allowance method, to write off an account that has been determined to be uncollectible, the entry would include a. debiting Accounts Receivable and crediting Allowance for Bad Debts. b. debiting Bad Debt Expense and crediting Allowance for Bad Debts. c. debiting Allowance for Bad Debts and crediting Bad Debt Expense. d. debiting Allowance for Bad Debts and crediting Accounts Receivable. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 55. After aging the accounts receivable, it is estimated that $790 will not be collected and the allowance account has an existing debit balance of $230. The adjusting entry under the aging approach would be for the amount of a. $790. b. $230. c. $560. d. $1,020. ANSWER: d POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 56. After aging the accounts receivable, it is estimated that $420 will not be collected and the allowance account has an existing debit balance of $100. If accounts receivable is $145,000, the net receivables would be a. $145,000. b. $144,580. c. $144,900. d. $144,480. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min. 57. Accountants argue that which of the following approaches to estimating Allowance for Bad Debts provides a realistic estimate of the net receivables? a. taking a percentage of net sales b. taking a percentage of revenue c. aging the accounts receivable d. analyzing the sales on account ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 58. Which of the following is an advantage of using the direct write-off method? a. The revenue associated with the sale might be recognized in one period and the expense resulting from the uncollectible account recognized in another. b. The amount of Bad Debt Expense recognized in a given period is subject to manipulation by management. c. The amount of Accounts Receivable reported on the balance sheet does not represent the amount of cash actually expected to be collected. d. It is very simple to apply. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.71 - LO: 16-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 59. When an account has been written off under the direct write-off method in one period and is collected in a subsequent period, the credit to reinstate the account is made to a. Accounts Receivable. b. Bad Debt Expense. c. Bad Debt Income. d. Uncollectible Accounts Recovered. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.71 - LO: 16-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 60. Under the direct write-off method, when a previously written-off account is recovered in the same accounting period, which of the following entries is required to reinstate the account? a. debit Accounts Receivable and credit Bad Debt Expense b. debit Accounts Receivable and credit Cash c. debit Cash and credit Bad Debt Expense d. debit Cash and credit Accounts Receivable ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.71 - LO: 16-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 61. After aging the accounts receivable, it is estimated that $700 will not be collected and the allowance account has an existing credit balance of $100. The adjusting entry under the aging approach would be for the amount of a. $100. b. $600. c. $700. d. $800. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 62. A detailed analysis of the accounts receivable to determine the length of time each account has been outstanding is called a. taking a percentage of sales on account. b. aging the accounts receivable. c. analyzing the accounts receivable. d. aging the uncollectible accounts. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 63. When all of the cash for an account previously written off under the direct write-off method is unexpectedly collected, the correct entry is a. debit Bad Debt Expense and credit Accounts Receivable. b. debit Accounts Receivable and credit Bad Debt Expense. c. debit Cash and credit Accounts Receivable. d. dependent on the period in which the cash was collected. ANSWER: d POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.71 - LO: 16-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 64. The direct write-off method is a. acceptable for financial reporting purposes. b. required for income tax purposes. c. acceptable for auditing purposes. d. required by generally accepted accounting principles. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.71 - LO: 16-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 65. Under the direct write-off method, when an account receivable is written off in one accounting period and is collected in the following accounting period, which of the following would be included in the journal entry? a. debit Accounts Receivable b. credit Bad Debt Expense c. credit Cash d. credit Accounts Receivable ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.71 - LO: 16-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 66. At the completion of the current fiscal year ending December 31, the balance of Accounts Receivable for CertaPro Painters was $22,300. Credit sales for the year were $515,000. Required: Make the necessary adjusting entry in general journal form under each of the following assumptions. 1. Allowance for Bad Debts has a credit balance of $870. a. The percentage of sales method is used and bad debt expense is estimated to be 1.0% of credit sales. b. The percentage of receivables method is used and an analysis of the accounts produces an estimate of $1,580 in uncollectible accounts. 2. Allowance for Bad Debts has a debit balance of $615. a. The percentage of sales method is used and bad debt expense is estimated to be 0.8% of credit sales. Cengage Learning Testing, Powered by Cognero

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Chapter 16—Accounting for Accounts Receivable b.

The percentage of receivables method is used and an analysis of the accounts produces an estimate of $1,510 in uncollectible accounts.

ANSWER:

1a. GENERAL JOURNAL

Description ADJUSTING ENTRIES Dec. 31 Bad Debt Expense Allowance for Bad Debts Date

Page 1 Post Ref.

Debit

Credit

5,150.00 5,150.00

1b. GENERAL JOURNAL

Date

Description

Page 1 Post Ref.

ADJUSTING ENTRIES Dec. 31 Bad Debt Expense Allowance for Bad Debts

Debit

Credit

710.00 710.00

2a. GENERAL JOURNAL

Date

Description ADJUSTING ENTRIES Dec. 31 Bad Debt Expense Allowance for Bad Debts

Page 1 Post Ref.

Debit

Credit

4,120.00 4,120.00

2b. GENERAL JOURNAL

Description Date ADJUSTING ENTRIES Dec. 31 Bad Debt Expense Allowance for Bad Debts

Page 1 Post Ref.

Debit

Credit

2,125.00 2,125.00

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

Page 27

Chapter 16—Accounting for Accounts Receivable NOTES:

20 min.

67. The USA Homecare Company uses the allowance method of accounting for uncollectible accounts. Record journal entries for the transactions listed below. Mar. 1 May 30 July 18

Received $225 from Jon Muncy in payment of a $900 account. The balance is written off as uncollectible. Wrote off the account of Brenda Disesso, $815. Received a check from Brenda Disesso in full payment of previously written-off account.

ANSWER: GENERAL JOURNAL

Description Date Mar. 1 Cash Accounts Receivable/J. Muncy

May

July

Page 1 Post Ref.

Debit 225.00

Credit 225.00

1 Allowance for Bad Debts Accounts Receivable/J. Muncy

675.00

30 Allowance for Bad Debts Accounts Receivable/B. Disesso

815.00

18 Accounts Receivable/B. Disesso Allowance for Bad Debts

815.00

18 Cash Accounts Receivable/B. Disesso

815.00

675.00

815.00

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Easy COLL.HEIN.17.69 - LO: 16-1 COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 15 min. 68. At the end of the current year, the balance of the accounts receivable account for Astro Masonry was $57,000. Credit sales for the year were $629,000.

Required: Determine the amount of the adjusting entries for uncollectible accounts and the amount of the net receivables under each of the following assumptions. 1. The Allowance for Bad Debts has a credit balance of $840. Cengage Learning Testing, Powered by Cognero

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Chapter 16—Accounting for Accounts Receivable a.

The percentage of sales method is used and it is estimated that bad debts expense will be 1.6% of credit sales. b. The percentage of receivables method is used and based on an analysis of the accounts it is estimated that bad debts will amount to $3,700. The Allowance for Bad Debts has a debit balance of $400. a. The percentage of sales method is used and it is estimated that bad debts expense will be 1% of credit sales. b. The percentage of receivables method is used and based on an analysis of the accounts it is estimated that bad debts will amount to $3,900.

ANSWER:

1a. GENERAL JOURNAL

Date

Description ADJUSTING ENTRIES Bad Debt Expense Allowance for Bad Debts

Page 1 Post Ref.

Debit

Credit

10,064.00 10,064.00

Allowance for Bad Debts = $10,064 + $840 = $10,904 Net Receivables = $57,000 − $10,904 = $46,096 1b. GENERAL JOURNAL

Date

Description ADJUSTING ENTRIES Bad Debt Expense Allowance for Bad Debts

Page 1 Post Ref.

Debit

Credit

2,860.00 2,860.00

Allowance for Bad Debts = $2,860 + $840 = $3,700 Net Receivables = $57,000 − $3,700 = $53,300 2a. GENERAL JOURNAL

Date

Description ADJUSTING ENTRIES Bad Debt Expense Allowance for Bad Debts

Page 1 Post Ref.

Debit

Credit

6,290.00 6,290.00

Allowance for Bad Debts = $6,290 − $400 = $5,890 Net Receivables = $57,000 − $5,890 = $51,110 2b. GENERAL JOURNAL Cengage Learning Testing, Powered by Cognero

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Chapter 16—Accounting for Accounts Receivable

Date

Description ADJUSTING ENTRIES Bad Debt Expense Allowance for Bad Debts

Post Ref.

Debit

Credit

4,300.00 4,300.00

Allowance for Bad Debts = $4,300 − $400 = $3,900 Net Receivables = $57,000 − $3,900 = $53,100 POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 15 min. 69. Larry Kordoski owns a clothing store that has a $31,000 balance in Accounts Receivable and a $1,600 balance in Allowance for Bad Debts.

Required: 1. Determine the net realizable value of the accounts receivable. 2. Assume that an account receivable in the amount of $350 was written off using the allowance method. Determine the net realizable value of the accounts receivable after the write off. ANSWER:

1. Accounts receivable Less: allowance for bad debts Net receivables

2. Accounts receivable Less: allowance for bad debts Net receivables POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 5 min. Cengage Learning Testing, Powered by Cognero

$31,000 1,600 $29,400

$30,650 1,250 $29,400

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Chapter 16—Accounting for Accounts Receivable 70. Texas Roundup uses the direct write-off method in accounting for uncollectible accounts. Year 1 May 28 July 5 Year 2 Mar. 15

Sold merchandise on account to South Shore Motors, $11,000. Received $5,000 from South Shore Motors and wrote off the remainder owed on the sale of May 28 as uncollectible. Reinstated the account of South Shore Motors that had been written off on July 5 of the previous year and received $6,000 cash in full settlement.

Required: Record the above transactions in general journal form. ANSWER:

Year 1 GENERAL JOURNAL

Date May

July

Description Accounts Receivable/South Shore 28 Motors Sales

Page 1 Post Ref.

Debit

Credit

11,000.00 11,000.00

5 Cash Accounts Receivable/South Shore Motors

5,000.00

5 Bad Debt Expense Accounts Receivable/South Shore Motors

6,000.00

5,000.00

6,000.00

Year 2 GENERAL JOURNAL

Description Accounts Receivable/South Shore Mar. 15 Motors Uncollectible Accounts Recovered Date

15 Cash Accounts Receivable/South Shore Motors

Page 1 Post Ref.

Debit

Credit

6,000.00 6,000.00 6,000.00 6,000.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.71 - LO: 16-3 ACCREDITING STANDARDS: AICPA FN-Measurement Cengage Learning Testing, Powered by Cognero

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Chapter 16—Accounting for Accounts Receivable

TOPICS: KEYWORDS: NOTES:

BUSPROG: Analytic ACBSP: APC-12-Receivables Reporting Bloom's: Applying 10 min.

71. Supreme Carpet Care estimates the amount of uncollectible accounts using the percentage of receivables method. After aging the accounts, it is estimated that $7,225 will not be collected.

Required: Give the end-of-period adjusting entry at December 31 in general journal form to enter the estimate for bad debt expense assuming the allowance for bad debts account has a debit balance of $420 before adjustment. ANSWER: GENERAL JOURNAL

Page 1 Post Ref.

Description Date ADJUSTING ENTRIES Dec. 31 Bad Debt Expense Allowance for Bad Debts

Debit

Credit

7,645.00 7,645.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 5 min. 72. The following account balances are those of Music Land Supply Company as of December 31, the end of the fiscal year, before adjustments. Accounts Receivable Allowance for Bad Debts Credit Sales

$ 43,600 180 470,000

cr.

Required: Prepare the necessary adjusting entry to record Bad Debt Expense in each of the following independent cases. a. Uncollectible accounts are estimated at 1.5% of credit sales. b. An aging of the accounts receivable indicates that $6,850 will not be collected. c. Assume the same facts in (b), except that the balance in Allowance for Bad Debts is a $420 debit before the adjustment. d. Assume the same facts as in (a), except that the balance in Allowance for Bad Debts is a $350 debit before the adjustment. ANSWER:

a. GENERAL JOURNAL

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Chapter 16—Accounting for Accounts Receivable

Description Date ADJUSTING ENTRIES Dec. 31 Bad Debt Expense Allowance for Bad Debts

Post Ref.

Debit

Credit

7,050.00 7,050.00

b. GENERAL JOURNAL

Description Date ADJUSTING ENTRIES Dec. 31 Bad Debt Expense Allowance for Bad Debts

Page 1 Post Ref.

Debit

Credit

6,670.00 6,670.00

c. GENERAL JOURNAL

Description Date ADJUSTING ENTRIES Dec. 31 Bad Debt Expense Allowance for Bad Debts

Page 1 Post Ref.

Debit

Credit

7,270.00 7,270.00

d. GENERAL JOURNAL

Description ADJUSTING ENTRIES Dec. 31 Bad Debt Expense Allowance for Bad Debts Date

Page 1 Post Ref.

Debit

Credit

7,050.00 7,050.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 20 min. 73. Record the following transactions for Heart and Soul Dance Co. in general journal form. 20-x Dec. 31

Net sales on account for the period were $640,000. Heart and Soul Dance Co. uses the percentage of sales method of estimating uncollectible accounts. Heart and Soul Dance

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Chapter 16—Accounting for Accounts Receivable Co. estimates that 3% of net sales are uncollectible. The balance in Allowance for Bad Debts is a $980 credit. 20-y Jan. 6 Mar. 8 May 28 ANSWER:

The accounts receivable of Marissa Marco was determined to be uncollectible and written off, $6,200. Notice was received that Paul Dante, a customer, was bankrupt. His balance of $4,200 was written off. Reinstated the Shin Yun account that had been written off in the preceding year as uncollectible. Entered the receipt of $5,400 cash as full settlement of Yun's account. 20-x GENERAL JOURNAL

Description Date Dec. 31 Bad Debt Expense Allowance for Bad Debts

Page 1 Post Ref.

Debit 19,200.00

Credit 19,200.00

20-y GENERAL JOURNAL

Description Date Jan. 6 Allowance for Bad Debts Accounts Receivable/M. Marco

Page 1 Post Ref.

Debit 6,200.00

Credit 6,200.00

Mar. 8 Allowance for Bad Debts Accounts Receivable/P. Dante

4,200.00

May

28 Accounts Receivable/S. Yun Allowance for Bad Debts

5,400.00

28 Cash Accounts Receivable/S. Yun

5,400.00

4,200.00

5,400.00

POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 20 min.

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Chapter 16—Accounting for Accounts Receivable 74. Empire Bridal Boutique has a credit balance of $620 in its allowance for bad debts account as of December 31, 20--. An analysis of the accounts receivable of Empire Bridal Boutique as of the same date, reveals the following: Est. Percentage Balance Uncollectible $63,000 2% 7,100 5% 6,300 11% 2,900 40% $79,300

Age Interval Not due 1–30 days past due 31–60 days past due Over 60 days past due

Required: 1. Prepare an aging schedule as of December 31, 20--. 2. Prepare the adjusting entry to record the Bad Debt Expense at the end of the year. 3. Determine the net accounts receivables at December 31, 20--. ANSWER:

1. Age Interval Not due 1–30 days past due 31–60 days past due Over 60 days past due

Balance $63,000 7,100 6,300 2,900 $79,300

Est. Percentage Uncollectible 2% 5% 11% 40%

Est. Amount Uncollectible $1,260 355 693 1,160 $3,468

2. GENERAL JOURNAL

Description ADJUSTING ENTRIES Dec. 31 Bad Debt Expense Allowance for Bad Debts Date

3. Accounts receivable Less: allowance for bad debts Net accounts receivable POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 20 min. Cengage Learning Testing, Powered by Cognero

Page 1 Post Ref.

Debit

Credit

2,848.00 2,848.00

$79,300 3,468 $75,832

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Chapter 16—Accounting for Accounts Receivable 75. Jill's Wholesale House uses the direct write-off method in accounting for uncollectible accounts. Record the following transactions in general journal form. Year 1 Oct. 10 Dec. 22

Year 2 Apr. 4 ANSWER:

Sold merchandise on account to Country Kitchen, $14,500. Received $8,000 from Country Kitchen and wrote off the remainder owed on the sale of October 10 as uncollectible.

Reinstated the account of Country Kitchen that had been written off on December 22 of the previous year and received $6,500 cash in full settlement. Year 1 GENERAL JOURNAL

Description Accounts Receivable/Country Oct. 10 Kitchen Sales Date

Page 1 Post Ref.

Debit

Credit

14,500.00 14,500.00

Dec. 22 Cash Accounts Receivable/Country Kitchen

8,000.00

22 Bad Debt Expense Accounts Receivable/Country Kitchen

6,500.00

8,000.00

6,500.00

Year 2 GENERAL JOURNAL

Date Apr. 4

Description Accounts Receivable/Country Kitchen Uncollectible Accounts Recovered

4 Cash Accounts Receivable/Country Kitchen

Page 1 Post Ref.

Debit 6,500.00

Credit

6,500.00 6,500.00 6,500.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.71 - LO: 16-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting Cengage Learning Testing, Powered by Cognero

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Chapter 16—Accounting for Accounts Receivable KEYWORDS: NOTES:

Bloom's: Applying 20 min.

76. When using the ____________________ method, the current year's uncollectible accounts are estimated based on the relationship between the amount of accounts receivable and the amount of uncollectible accounts in prior years. ANSWER: percentage of receivables POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 77. The concept that requires expenses to be matched with the revenues they helped to produce is called the ____________________. ANSWER: matching principle POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 78. Under the ____________________, the write-off of an account as uncollectible does not affect either the income statement or the balance sheet. ANSWER: allowance method POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 79. The ____________________ is a technique that attempts to recognize bad debt expense in the same period that the related credit sales are made. ANSWER: allowance method POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 80. The ____________________ method is the method in which the bad debt expense is not recognized until it has been determined that an account is uncollectible. ANSWER: direct write-off POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.71 - LO: 16-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 81. ____________________ is the process of estimating the uncollectible amount by analyzing account balances according to the length of time the accounts have been outstanding. ANSWER: Aging the receivables POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 16—Accounting for Accounts Receivable 82. The method in which the current year's uncollectible accounts are estimated based on the relationship between the amount of credit sales and the amount of uncollectible accounts in prior years is called the ____________________ method. ANSWER: percentage of sales POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.70 - LO: 16-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 83. ____________________ is the account that reflects the loss from failure to collect an account receivable. ANSWER: Bad Debt Expense POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.69 - LO: 16-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. aging the receivables b. allowance method c. bad debt expense d. direct write-off method e. matching principle f. net receivables g. percentage of receivables method h. percentage of sales method DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.69 - LO: 16-1 COLL.HEIN.17.70 - LO: 16-2 COLL.HEIN.17.71 - LO: 16-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 16—Accounting for Accounts Receivable 84. A technique that attempts to recognize bad debt expense in the same period that the related credit sales are made. ANSWER: b POINTS: 1 85. A method in which the bad debt expense is not recognized until it has been determined that an account is uncollectible. ANSWER: d POINTS: 1 86. The amount a business expects to collect from its accounts receivable; calculated as Accounts Receivable less Allowance for Bad Debts. ANSWER: f POINTS: 1 87. A method in which the current year's uncollectible accounts are estimated based on the relationship between the amount of credit sales and the amount of uncollectible accounts in prior years. ANSWER: h POINTS: 1 88. A concept that requires expenses to be matched with the revenues they helped to produce. ANSWER: e POINTS: 1 89. A loss from failure to collect an account receivable. ANSWER: c POINTS: 1 90. The process of estimating the uncollectible amount by analyzing account balances according to the length of time the accounts have been outstanding. ANSWER: a POINTS: 1 91. A method in which the current year's uncollectible accounts are estimated based on the relationship between the amount of accounts receivable and the amount of uncollectible accounts in prior years. ANSWER: g POINTS: 1

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Chapter 17—Accounting for Notes and Interest 1. A promissory note is usually referred to as a "note." a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.72 - LO: 17-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. A 90-day note dated July 9 would be due on October 9. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. When a note receivable matures, the amount must be paid directly to the payee. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 1

Chapter 17—Accounting for Notes and Interest 4. The maker of the note is the one who is to receive the specified amount of money. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.72 - LO: 17-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. A promissory note may be interest bearing or non-interest bearing. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.72 - LO: 17-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. When the term of a note is specified in days, time is computed using the exact number of days from the date of the note to the date of its maturity. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 2

Chapter 17—Accounting for Notes and Interest 7. The principal of the note is the face amount that the maker promises to pay at maturity. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. The time of the note consists of the days or months from the date of issue to the date of the note's maturity. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. A three-month note dated April 1 would be due on July 1. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 10. A written promise to pay a specific sum of money at a definite future date is called a promissory note. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.72 - LO: 17-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. A promissory note must be signed by the maker of the note. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.72 - LO: 17-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. Interest = Principal × Rate × Time. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 13. If the maker of a note refuses or is unable to pay or renew it at maturity, the note is said to be dishonored. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. The maker of the note is the one who promises to pay a certain amount of money at a definite future time. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.72 - LO: 17-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. The proper entry to make when a note is paid at maturity depends on whether it is an interest-bearing or a noninterest-bearing note. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 16. The total of the notes payable register should agree with the total of the notes receivable account in the general ledger. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. If the time of the note is stated in days, the due date is the specified number of days after the issue date. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.76 - LO: 17-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. When a bank collects a notes receivable, it notifies the payee that the net amount has been added to the payee's account by using a credit advice. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 19. An auxiliary record of notes receivable that provides detailed information about the notes held by a business is known as a notes receivable register. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. The account that is credited for accrued interest on notes receivable is Interest Receivable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. The amount of interest on a 10% note of $600 dated May 7 and due July 18 would be $12.00. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 22. In preparing the financial statements at the end of the year, the balance in the interest receivable account will be reported on the balance sheet as a current asset. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. Maturity value is equal to face value plus interest. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. The stated rate of interest is always the same as the effective rate of interest. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 25. The correct entry to make when a note is paid at maturity depends on whether the note is interest bearing or noninterest bearing. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. In computing interest, it is customary to consider 360 days as a year. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.76 - LO: 17-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. To obtain an extension of time for the payment of an account, a customer may issue a note for all or part of the amount due. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 28. The information contained in the notes receivable register normally is obtained from the general ledger accounts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. The account, Discount on Notes Payable, is a contra-liability account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. In preparing the financial statements at the end of the year, the account Accrued Interest Payable is reported on the income statement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 31. On a non-interest bearing, discounted note, it is possible for the stated interest rate to differ from the effective interest rate. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. Accrued interest on notes payable is interest expense that has been incurred but not paid. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. An auxiliary record of notes payable that provides detailed information about the notes owed by a business is known as a notes payable journal. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 34. If a business needs cash before the due date of a note, it can endorse the note and transfer it to a bank. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. The net amount received from the bank on a discounted note receivable is called the proceeds. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. When commercial banks deduct interest in advance on a note, the procedure is known as discounting. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 37. A debit balance in the discount on notes payable account will normally become a debit to Interest Expense. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. Under accrual accounting, revenue is recognized when it is earned; therefore, accrued interest must be recorded at the end of the period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 39. For notes payable issued in one period and due in the following period, accrued interest payable must be recorded at the end of the period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 40. A note on which no rate of interest is specified is a(n) a. market-rate note. b. interest-bearing note. c. non-interest-bearing note. d. variable note. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.72 - LO: 17-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 41. When a business endorses a note and transfers it to a bank, the process is called a. discounting a note receivable. b. cosigning a note receivable. c. collecting a note receivable. d. dishonoring a note receivable. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 42. The person who promises to pay a certain amount of money at a definite future time is called the a. maker of the note. b. payee of the note. c. discounter of the note. d. endorser of the note. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.72 - LO: 17-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 43. The one who is to receive the specified amount of money from a note is called the a. maker of the note. b. payee of the note. c. discounter of the note. d. endorser of the note. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.72 - LO: 17-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 44. When a note is received from a customer to obtain an extension of time for payment on a past-due account, the journal entry would include a. debiting Accounts Receivable and crediting Notes Receivable. b. debiting Accounts Payable and crediting Notes Payable. c. debiting Notes Payable and crediting Accounts Payable. d. debiting Notes Receivable and crediting Accounts Receivable. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 45. In calculating interest on a note, it is necessary to take which of the following factors into consideration? a. the principal b. the maker c. the payee d. the bank ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 46. The journal entry for accrued interest on a note payable includes a. crediting Interest Expense. b. debiting Accrued Interest Receivable and crediting Interest Revenue. c. debiting Accrued Interest Payable and crediting Interest Expense. d. debiting Interest Expense and crediting Accrued Interest Payable. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 47. The face amount of a note that is promised to be paid at maturity is called the a. rate of interest. b. principal of the note. c. time of the note. d. discount of the note. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 48. A $7,300, 11.9% note is dated April 21 and is due in 60 days. The amount of interest on the due date of the note would be a. $119.00. b. $60.00. c. $73.00. d. $144.78. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 49. A $6,700, 8.5% note is dated April 10 and is due in 75 days. The maturity value of the note would be a. $6,800.00. b. $6,818.65. c. $7,500.00. d. $7,075.00. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 50. When a bank collects a note for the holder, it notifies the holder on a form called a a. debit advice. b. proceed report. c. collection report. d. credit advice. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 51. Which of the following is usually expressed in the form of a percentage? a. rate of interest b. principal of the note c. time of the note d. discount of the note ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 52. Which of the following consists of the days or months from the date of issue of a note to the date of its maturity? a. rate of interest b. principal of the note c. time of the note d. discount of the note ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 53. A $5,000, 12% note is dated April 10 and is due in 90 days. The due date would be a. June 9. b. June 10. c. July 9. d. July 10. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 54. When the holder of an interest-bearing note is unable to collect the note when due, the journal entry includes a. debiting Notes Receivable and crediting Accounts Receivable. b. debiting Notes Receivable and crediting Accounts Receivable and Interest Revenue. c. debiting Accounts Receivable and crediting Interest Revenue. d. debiting Accounts Receivable and crediting Notes Receivable and Interest Revenue. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 55. An auxiliary record of notes receivable that provides detailed information about notes held by a business is known as a a. notes receivable register. b. notes receivable worksheet. c. notes receivable report. d. schedule of notes receivable. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 56. Face value of a note plus interest is called the a. discount. b. proceeds. c. principal. d. maturity value. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 57. Maturity value minus the discount amount is called the a. discount. b. proceeds. c. principal. d. maturity value. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 58. When a notes receivable is discounted, the business that endorses the note becomes potentially liable to the bank. This liability is called a a. potential liability. b. dependent liability. c. conditional liability. d. contingent liability. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 59. The adjusting entry for accrued interest on a notes receivable includes a. debiting Interest Expense and crediting Interest Revenue. b. debiting Accrued Interest Receivable and crediting Interest Revenue. c. debiting Interest Revenue and crediting Accrued Interest Payable. d. debiting Accrued Interest Receivable and crediting Interest Payable. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 60. When a company pays cash to redeem a interest-bearing-note, the transaction includes a. debiting Cash and crediting Notes Payable. b. debiting Cash and Interest Expense and crediting Notes Payable. c. debiting Notes Payable and crediting Cash. d. debiting Cash and crediting Notes Receivable. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min. 61. The account, Discount on Notes Payable, is a a. contra-asset. b. deferred charge. c. contra-liability. d. liability. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 62. The discount on a note payable gradually becomes a. interest expense. b. interest revenue. c. interest payable. d. interest receivable. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 63. When a company pays an interest-bearing note payable on the due date, the journal entry on the books of the company making the payment includes a. debiting Notes Payable and Interest Expense and crediting Cash. b. debiting Cash and crediting Notes Payable and Interest Expense. c. debiting Notes Payable and Cash and crediting Interest Revenue. d. debiting Cash and Interest Expense and crediting Notes Payable. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 64. When banks deduct interest on a note in advance, this procedure in known as a. endorsing. b. recording. c. securing. d. discounting. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 65. If the maker of a note does not pay or renew a note at maturity, the note is said to be a. dishonored. b. discounted. c. discontinued. d. dismantled. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 17—Accounting for Notes and Interest 66. American Bank has loaned $12,000 to Shoreline Petroleum Inc. using a 60-day non-interest-bearing note. The bank discounted the note at 12%. The proceeds of the loan will be a. $12,000. b. $11,760. c. $240. d. $12,240. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 2 min. 67. Federal Bank of America has loaned $9,000 to Southgate Animal Hospital, using a 90-day non-interest-bearing note. The bank discounted the note at 8%. The debit to Discount on Notes Payable in the general journal will be in the amount of a. $9,000.00. b. $8,820.00. c. $180.00 d. $9,180.00. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 3 min.

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Chapter 17—Accounting for Notes and Interest 68. The interest due at maturity on a $489.52, 8% note, dated May 28 and due August 2 is a. $4.37. b. $6.04. c. $7.18. d. $6.30. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 3 min. 69. For the following notes, calculate the due date.

1. 2. 3. 4. 5.

Date of Note Jan. 5 Apr. 18 Aug. 22 Sep. 11 Oct. 24

Term of Note 52 days 82 days 90 days 110 days 120 days

Due Date _________ _________ _________ _________ _________

1. February 26 2. July 9 3. November 20 4. December 30 5. February 21 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 4 min. ANSWER:

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Chapter 17—Accounting for Notes and Interest 70. Calculate interest using a 360-day year.

1. 2. 3. 4. 5.

Principal $2,700 3,000 3,300 3,800 5,300

Interest Rate 9.6% 8.0% 6.0% 10.5% 12.0%

Time 30 days 45 days 80 days 120 days 150 days

Interest _________ _________ _________ _________ _________

1. $21.60 2. $30.00 3. $44.00 4. $133.00 5. $265.00 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 4 min. ANSWER:

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Chapter 17—Accounting for Notes and Interest 71. A 100-day note with a face amount of $54,000 and interest rate of 9% is issued on June 1.

Required: 1. Compute the following using a 360-day year: a. Maturity value of the note $___________ b. Maturity date ___________ c. Interest $___________ 2. The note is discounted on July 1. The bank discount rate is 12%. Compute the following: a. Number of days in the discount period ___________ b. Discount amount $___________ c. Proceeds $___________ ANSWER:

a. b. c.

$55,350.00 September 9 $1,350.00

a. b. c.

70 days $1,291.50 $54,058.50

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 5 min. 72. Record the following transactions for Pro Line Communications Inc. in the general journal. May 30 July 16 29 Aug. 15 28 Sept. 14 Oct. 20

Date

Accepted a 60-day, 12% note for $11,000 from Photo Master as payment on an account receivable. Accepted a 60-day, 11% note for $6,000 from Impact Images as payment on an account receivable. Received interest due on Photo Master note. The note is renewed for 45 days at 13% interest. Discounted the note from Impact Images at the bank at a 10% discount rate. Received full payment of the Photo Master note. Received notice from the bank that the Impact Images note is dishonored. Pro Line Communications Inc. paid the bank for the dishonored note plus interest. The dishonored Impact Images note is paid, plus 10% interest on the maturity value. GENERAL JOURNAL Post Description Ref.

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Page 1 Debit

Credit Page 30

Chapter 17—Accounting for Notes and Interest

ANSWER: GENERAL JOURNAL

Description Date May 30 Notes Receivable/Photo Master Accounts Receivable/Photo Master July

Post Ref.

Debit 11,000.00

Credit

11,000.00

16 Notes Receivable/Impact Images Accounts Receivable/Impact Images

6,000.00

29 Cash Notes Receivable/Photo Master (new) Notes Receivable/Photo Master (old) Interest Revenue

220.00

Aug. 15 Cash Notes Receivable/Impact Images Interest Revenue Cengage Learning Testing, Powered by Cognero

Page 1

6,000.00

11,000.00 11,000.00 220.00 6,059.08 6,000.00 59.08 Page 31

Chapter 17—Accounting for Notes and Interest

Sept.

28 Cash Notes Receivable/Photo Master Interest Revenue

11,178.75

14 Accounts Receivable/Impact Images Cash

6,110.00

Oct. 20 Cash Accounts Receivable/Impact Images Interest Revenue

11,000.00 178.75

6,110.00 6,171.10 6,110.00 61.10

POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Applying NOTES: 15 min.

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Chapter 17—Accounting for Notes and Interest 73. The following is a list of outstanding notes payable as of December 31, 20--. Interest is paid at maturity. Date of Note 10/14 11/23 12/16

a. b. c.

Principal $4,500 $7,200 $13,000

Interest Rate 8.5% 7% 11%

Accrued Interest __________ __________ __________

Term 90 days 120 days 150 days

Required: 1. Compute the accrued interest at the end of the year. 2. Prepare the adjusting entry for accrued interest in the general journal. GENERAL JOURNAL Post Description Ref.

Date

ANSWER:

Date of Note 10/14 11/23 12/16

a. b. c.

Page 1 Debit

Credit

Principal $4,500 $7,200 $13,000

Interest Rate 8.5% 7% 11%

Period Covered 78 days 38 days 15 days

Accrued Interest $ 82.88 53.20 59.58 $195.66

GENERAL JOURNAL

Description Date ADJUSTING ENTRIES Dec. 31 Interest Expense Accrued Interest Payable

Page 1 Post Ref.

Debit

Credit

195.66 195.66

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Easy COLL.HEIN.17.73 - LO: 17-2 COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Applying NOTES: 15 min. 74. From the information given below, compute the time in days for the following notes: Date of Note Cengage Learning Testing, Powered by Cognero

Due Date

Time in Days Page 33

Chapter 17—Accounting for Notes and Interest 1. 2. 3. 4. 5.

June 28, 2010 March 5, 2010 April 20, 2010 January 12, 2010 December 17, 2010

August 10, 2010 August 12, 2010 July 17, 2010 May 15, 2010 February 2, 2011

__________ __________ __________ __________ __________

From the information given below, determine the due date for the following notes:

6. 7. 8. 9. 10.

Date of Note February 14, 2010 March 13, 2010 May 15, 2010 November 15, 2010 October 27, 2010

Time in Days/Months 45 days 60 days 3 months 30 days 120 days

Due Date __________ __________ __________ __________ __________

From the information given below, calculate the accrued interest for the following notes (round to two decimal places, if necessary):

11. 12. 13. 14. 15.

Principal $2,200 2,500 2,800 3,300 4,800

Interest Rate 9.5% 12.5% 10.75% 8.9% 7.3%

Time 45 days 60 days 90 days 30 days 120 days

Accrued Interest __________ __________ __________ __________ __________

1. 43 days 2. 160 days 3. 88 days 4. 123 days 5. 47 days 6. March 31, 2010 7. May 12, 2010 8. August 15, 2010 9. December 15, 2010 10. February 24, 2011 11. $26.13 12. $52.08 13. $75.25 14. $24.48 15. $116.80 POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying ANSWER:

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Chapter 17—Accounting for Notes and Interest NOTES:

15 min.

75. Prepare the general journal entries for Infinity Diner for the following notes receivable transactions (assuming there are 28 days in February). Dec. 3 11 Jan. 2 10 Feb. 1 ??? ???

Date

Sold merchandise to Brian Chan on account, $6,900. Sold merchandise to Gloria Lupo on account, $3,600. Received a $6,900, 10%, 30-day note from Brian Chan in payment of account. Received a $3,600, 12%, 30-day note from Gloria Lupo in payment of account. Received $600, plus interest on January 2 note, and a new, 14% 60-day note for the remaining balance. On the maturity date, note dated January 10 was dishonored. On the maturity date, Infinity Diner received principal and interest for February 1 note. GENERAL JOURNAL Post Description Ref.

Page 1 Debit

Credit

ANSWER: GENERAL JOURNAL Date Dec. Cengage Learning Testing, Powered by Cognero

Description 3 Accounts Receivable/Brian Chan

Page 1 Post Ref.

Debit

Credit

6,900.00 Page 35

Chapter 17—Accounting for Notes and Interest Sales

Jan.

Feb.

Apr.

6,900.00

11 Accounts Receivable/Gloria Lupo Sales

3,600.00

2 Notes Receivable/Brian Chan Accounts Receivable/Brian Chan

6,900.00

10 Notes Receivable/Gloria Lupo Accounts Receivable/Gloria Lupo

3,600.00

1 Cash Notes Receivable/Brian Chan (new) Notes Receivable/Brian Chan (old) Interest Revenue

657.50 6,300.00

9 Accounts Receivable/Gloria Lupo Notes Receivable/Gloria Lupo Interest Revenue

3,636.00

2 Cash Notes Receivable/Brian Chan Interest Revenue

6,447.00

3,600.00

6,900.00

3,600.00

6,900.00 57.50

3,600.00 36.00

6,300.00 147.00

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Moderate COLL.HEIN.17.73 - LO: 17-2 COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Applying NOTES: 15 min. 76. Prepare the general journal entries for the following notes payable transactions for the Village Dock Café. Mar. 3 Apr. 2 ??? ???

Date

Village Dock Café purchased merchandise on account, $6,000. Village Dock Café issued a 60day, 10% note to pay off the account. Village Dock Café paid $3,200 plus interest on the note issued on April 2, and issued a new 90-day, 14% note for the unpaid balance. Village Dock Café paid off the preceding note on the maturity date. GENERAL JOURNAL Post Description Ref.

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Page 1 Debit

Credit Page 36

Chapter 17—Accounting for Notes and Interest

ANSWER: GENERAL JOURNAL

Description Date Mar. 3 Purchases Accounts Payable Apr.

June

Page 1 Post Ref.

Debit 6,000.00

6,000.00

2 Accounts Payable Notes Payable

6,000.00

1 Notes Payable (old) Interest Expense Cash Notes Payable (new)

6,000.00 100.00

Aug. 30 Notes Payable Interest Expense Cash

Credit

6,000.00

3,300.00 2,800.00 2,800.00 98.00 2,898.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Applying NOTES: 15 min. 77. From the information given below, determine the due date for the following notes:

1. 2.

Date Issued January 1 January 15

Term of the Note 30 days 30 days

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Due Date __________ __________ Page 37

Chapter 17—Accounting for Notes and Interest 3. 4. 5.

March 20 March 20 June 18

60 days 3 months 90 days

__________ __________ __________

Compute the amount of accrued interest on the following notes:

Principal $7,800 3,600 2,700 4,300 5,500

6. 7. 8. 9. 10.

Interest Rate 9.0% 12.5% 9.9% 6.2% 11.0%

Time 75 days 45 days 90 days 6 months 120 days

Accrued Interest __________ __________ __________ __________ __________

Compute the number of days from the issue date to the maturity date for the following notes:

11. 12. 13. 14. 15.

Issue Date March 14, 2010 September 27, 2010 November 11, 2010 July 31, 2010 June 29, 2010

Maturity Date June 12, 2010 December 11, 2010 March 14, 2011 October 29, 2010 July 11, 2010

Term of the Note __________ __________ __________ __________ __________

1. January 31 2. February 14 3. May 19 4. June 20 5. September 16 6. $146.25 7. $56.25 8. $66.83 9. $133.30 10. $201.67 11. 90 days 12. 75 days 13. 123 days 14. 90 days 15. 12 days POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Applying NOTES: 15 min. ANSWER:

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Chapter 17—Accounting for Notes and Interest 78. City Graphics has the following notes payable transactions. Record these transactions in a general journal. July

5 9 11

Aug. 5 Sept. 3 Oct. 3

Date

Issued a $3,500 note to Roma Ceramic Inc. The 10%, 60-day note is in full payment of an account payable. Borrowed $5,000 from the bank signing a 6%, 90-day note. Paid $500 cash and issued a $2,000, 8% 30-day note to Design Center in payment of an account payable. Borrowed $3,600 for 30 days from the bank on a non-interest-bearing note. The discount rate is 10%. Paid the principal and interest due on the $3,500 note to Roma Ceramic Inc. Paid the interest due on the $5,000 note to the bank and renewed the principal for 30 days at 7%. GENERAL JOURNAL Post Description Ref.

Page 1 Debit

Credit

ANSWER: GENERAL JOURNAL

Description Date July 5 Accounts Payable/Roma Ceramic Inc. Notes Payable/Roma Ceramic Inc. Cengage Learning Testing, Powered by Cognero

Page 1 Post Ref.

Debit 3,500.00

Credit

3,500.00 Page 39

Chapter 17—Accounting for Notes and Interest

Aug.

Sept.

Oct.

9 Cash Notes Payable/Bank

5,000.00

11 Accounts Payable/Design Center Cash Notes Payable/Design Center

2,500.00

5 Cash Discount on Notes Payable Notes Payable

3,570.00 30.00

3 Notes Payable/Roma Ceramic Inc. Interest Expense Cash

3,500.00 58.33

3 Notes Payable/Bank (old) Interest Expense Cash Notes Payable/Bank (new)

5,000.00 75.00

5,000.00

500.00 2,000.00

3,600.00

3,558.33

75.00 5,000.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-06-Recording Transactions KEYWORDS: Bloom's: Applying NOTES: 20 min. 79. A(n) ____________________ is the notification to the payee that the bank has collected interest on a note and added the amount to the payee's account. ANSWER: credit advice POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min.

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Chapter 17—Accounting for Notes and Interest 80. To the maker of a note, the note is a(n) ____________________. ANSWER: notes payable POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.72 - LO: 17-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min. 81. When a note is ____________________, the maker does not pay or renew it at maturity. ANSWER: dishonored POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min. 82. To the payee of a note, the note is a(n) ____________________. ANSWER: notes receivable POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.72 - LO: 17-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min.

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Chapter 17—Accounting for Notes and Interest 83. A(n) ____________________ has the potential of becoming a real liability depending on future events. ANSWER: contingent liability POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min. 84. In computing interest, it is common to use ____________________ days in a year. ANSWER: 360 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min. 85. The ____________________ is the person or business agreeing to make the payment on a note. ANSWER: maker POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.72 - LO: 17-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min.

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Chapter 17—Accounting for Notes and Interest 86. A(n) ____________________ is a written promise to pay a specific sum at a definite future date. ANSWER: promissory note POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.72 - LO: 17-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min. 87. The term of the note, stated as a fraction of a year, is known as the ____________________. ANSWER: time POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.72 - LO: 17-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min. 88. The detailed auxiliary record for notes receivable is called the ____________________. ANSWER: notes receivable register POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min.

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Chapter 17—Accounting for Notes and Interest 89. The ____________________ is expressed in months or days from the date of issue to the date of maturity. ANSWER: term of a note POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min. 90. The face amount of the note that the maker promises to pay at maturity is known as the ____________________. ANSWER: principal of a note POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.73 - LO: 17-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min. 91. ____________________ is a procedure, which banks often use, of deducting interest in advance when making a loan. ANSWER: Discounting POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min.

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Chapter 17—Accounting for Notes and Interest 92. Interest revenue that has been earned but not yet received is said to be ____________________. ANSWER: accrued interest POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min. 93. A note with an explicit interest rate stated on the face of the note is a(n) ____________________. ANSWER: interest-bearing note POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.72 - LO: 17-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min. 94. The ____________________ is the interest amount paid divided by the proceeds received on a discounted note. ANSWER: effective rate POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min.

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Chapter 17—Accounting for Notes and Interest 95. Transferring a note receivable to a bank for cash is called ____________________. ANSWER: discounting a note POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min. 96. The difference between the maturity value of the note and the bank discount is called the ____________________. ANSWER: proceeds POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.74 - LO: 17-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min. Match the terms with the definitions. a. accrued interest on notes payable b. time c. proceeds (note receivable) d. principal of the note e. notes payable register f. credit advice g. maturity value h. discounting a note receivable i. dishonored j. effective rate k. promissory note l. maker DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.72 - LO: 17-1 COLL.HEIN.17.73 - LO: 17-2 COLL.HEIN.17.74 - LO: 17-3 COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement Cengage Learning Testing, Powered by Cognero

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Chapter 17—Accounting for Notes and Interest BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min. 97. A written promise to pay a specific sum at a definite future date. ANSWER: k POINTS: 1 98. The principal of the note plus interest. ANSWER: g POINTS: 1 99. A detailed auxiliary record of notes payable. ANSWER: e POINTS: 1 100. The person or business agreeing to make the payment on a note. ANSWER: l POINTS: 1 101. The face amount of the note that the maker promises to pay at maturity. The base on which interest is calculated. ANSWER: d POINTS: 1 102. Interest expense that has been incurred but not paid. ANSWER: a POINTS: 1 103. A note which the maker does not pay or renew at maturity. ANSWER: i POINTS: 1 104. Transferring a note receivable to the bank for cash. ANSWER: h POINTS: 1 105. A notification to the payee that the bank has collected interest on a note and added the amount to the payee's account. ANSWER: f POINTS: 1 106. The interest amount paid divided by the proceeds received on a discounted note. This amount will differ from the stated rate on the face of the note. ANSWER: j POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Chapter 17—Accounting for Notes and Interest 107. The term of the note stated as a fraction of a year. ANSWER: b POINTS: 1 108. The difference between the maturity value of the notes receivable and the bank discount. This is the amount of cash received by the business discounting the note. ANSWER: c POINTS: 1 Match the terms with the definitions. a. term of the note b. accrued interest on notes receivable c. bank discount (note payable) d. bank discount (note receivable) e. contingent liability f. rate of interest g. discounting (note payable) h. payee i. notes receivable register j. non-interest-bearing note k. interest-bearing note DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.72 - LO: 17-1 COLL.HEIN.17.73 - LO: 17-2 COLL.HEIN.17.74 - LO: 17-3 COLL.HEIN.17.75 - LO: 17-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-12-Receivables Reporting KEYWORDS: Bloom's: Remembering NOTES: 2 min. 109. The specific person or business to whom a note is payable. ANSWER: h POINTS: 1 110. A potential liability that may become a real liability depending on future events. ANSWER: e POINTS: 1 111. A note with an explicit interest rate stated on the face of the note. ANSWER: k POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Chapter 17—Accounting for Notes and Interest 112. A detailed auxiliary record of notes receivable. ANSWER: i POINTS: 1 113. The rate at which interest is charged, usually expressed as an annual percentage, but in some cases a monthly rate is quoted. ANSWER: f POINTS: 1 114. Interest revenue that has been earned but not yet received. ANSWER: b POINTS: 1 115. A note on which no rate of interest is specified, although the note does include an interest component. ANSWER: j POINTS: 1 116. The months or days from the date of issue to the date of maturity. ANSWER: a POINTS: 1 117. The procedure, which banks often use, of deducting interest in advance when making a loan. ANSWER: g POINTS: 1 118. An interest fee that the bank charges for the time between the date of discounting and the due date of the note. ANSWER: d POINTS: 1 119. The amount that the bank deducts from the face of a note. ANSWER: c POINTS: 1

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Chapter 18—Accounting for LongTerm Assets 1. All costs incurred to purchase land and prepare it for its intended use are credited to the land account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. Furniture and equipment are examples of tangible assets. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. Assets such as patents, copyrights, and trademarks are intangible assets. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 4. The write-off of the cost of an intangible long-term asset is called depreciation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. The write-off of the cost of a wasting asset is called amortization. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. Properties whose physical substance consists of natural resources that are consumed in the operation of a business are called wasting assets. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 7. The consumption or exhaustion of wasting assets is called depletion. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. If money is borrowed for the purpose of constructing a building or other facility, the interest incurred during the period of construction should be added to the cost of such building or facility. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. If there is an improvement to a building that extends the life of the building, the total cost incurred should be debited to the long-term asset. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.78 - LO: 18-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 10. The cost of planting trees and shrubs, installing fences, and paving parking areas are normally charged to the land improvements account and are later depreciated over their expected useful lives. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. Special tax assessments for streets, sewers, flood prevention, or parks are charged or added to the land account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. Depreciation is a process of cost allocation, not a process of valuation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.79 - LO: 18-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 13. The allocation of the cost of a plant asset over the periods expected to benefit from its use is called depreciation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.79 - LO: 18-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. Physical depreciation refers to the loss of usefulness because of inadequacy or obsolescence. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.79 - LO: 18-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. The recognition of depreciation is not intended to make the assets reflect their market value on the balance sheet. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.79 - LO: 18-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 16. The depreciation method in which the depreciable cost of an asset is apportioned equally over its estimated useful life in terms of months or years is called accelerated depreciation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. An asset purchased on or before the fifteenth of the month is considered to have been owned for the full month. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. The difference between the cost of an asset and its accumulated depreciation is its book value. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 19. The depreciation method using a fixed rate applied to the book value of the asset each year, resulting in successively smaller depreciation charges as the undepreciated cost diminishes year by year, is called the declining balance method. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. The purpose of depreciation is to match a plant asset's cost with the revenue it helps to produce. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.79 - LO: 18-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. The depreciation method that estimates the number of units of service or output that can be provided by an asset and allocates the depreciable cost of the asset on the basis of the use or output during each period is called the units-of-output or units-of-production method. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 18—Accounting for LongTerm Assets 22. The Modified Accelerated Cost Recovery System method of depreciation subtracts salvage value before calculating the annual depreciation expense. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. Depreciation methods that provide for a higher depreciation charge in the first year of an asset's life and gradually decreasing charges in subsequent years are called accelerated depreciation methods. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. Under the declining-balance method, salvage value is considered directly in the determination of the depreciation amount. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 18—Accounting for LongTerm Assets 25. All additions and some improvements increase the usefulness of buildings or equipment and will provide benefits in future periods. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.78 - LO: 18-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. Some improvements extend the useful life of an asset but do not increase its usefulness or efficiency. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.78 - LO: 18-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. If a plant asset has been fully depreciated and it is discarded or retired, no gain or loss will be realized. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 28. An asset should not be depreciated below its estimated salvage value. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. When a long-term asset is sold for more than its book value, the difference represents a gain. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. In accounting for exchanges of similar assets considered to have "commercial substance," financial accounting recognizes all gains and losses. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 31. For tax purposes, both gains and losses are recognized on exchanges of similar assets. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. Gains are similar to revenue and increase net income, and losses are similar to expenses and decrease net income. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. Transactions involving the purchase of long-term assets are entered by crediting the proper asset account and debiting the cash account or proper liability account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 34. Under the accrual basis of accounting, net income is determined by matching the revenues earned during a period with the expenses incurred as a result of the efforts made to produce the revenue. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. Over the life of an asset, the total of the amounts of the calculated annual net income will be about the same, regardless of the method of depreciation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. A business is not allowed to deduct depreciation expenses in calculating taxable income. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 37. A trade-in allowance cannot be greater than the book value of the asset traded. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. For plant assets acquired after 1986, either the double-declining-balance method or the Modified Accelerated Cost Recovery System (MACRS) must be used for tax purposes. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 39. Accumulated depletion should be reported as an operating expense on the income statement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.82 - LO: 18-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 40. A patent is a grant by the federal government to an inventor giving the exclusive right to produce, to use, and to sell an invention for a period of seventeen years. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.83 - LO: 18-7 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 41. A copyright is a federal grant of the exclusive right to the reproduction and sale of a literary, artistic, or musical composition for life plus 70 years after the death of the holder. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.83 - LO: 18-7 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 42. Assets that are NOT expected to provide benefits for a number of accounting periods are called a. property, plant, and equipment. b. long-term assets. c. fixed assets. d. current assets. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 43. Tangible assets include a. patents. b. cash. c. trademarks. d. copyrights. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 44. The write-off of the cost of plant and equipment is called a. depletion. b. depreciation. c. amortization. d. deterioration. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 45. The write-off of the cost of an intangible asset is called a. physical depreciation. b. functional depreciation. c. amortization. d. deterioration. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 46. Properties whose physical substance consists of natural resources that are consumed in the operation of the business are called a. depreciable assets. b. wasting assets. c. amortizable assets. d. intangible assets. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 47. Which of the following is an example of a wasting asset? a. timber b. land c. equipment d. building ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 48. Costs and assessments that should NOT be charged to the land account include a. streets. b. parks. c. installing fences. d. flood prevention. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 49. The loss of usefulness because of deterioration from age and wear is called a. functional depreciation. b. physical depreciation. c. technological depreciation. d. amortization. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.79 - LO: 18-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 50. The loss of usefulness because of inadequacy or obsolescence is called a. functional depreciation. b. physical depreciation. c. amortization. d. cost allocation. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.79 - LO: 18-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 51. Which of the following is NOT a way of calculating the amount of depreciation for each period? a. straight-line method b. declining-balance method c. sum-of-the-years'-digit method d. weighted-average method ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 52. Salvage value is not considered directly in the determination of the deprecation amount with the a. straight-line method. b. declining-balance method. c. sum-of-the-years'-digit method. d. units-of-production method. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 53. The depreciation method using a fixed rate applied to the undepreciated cost of the asset each year, resulting in successively smaller depreciation charges as the undepreciated cost diminishes year by year is called the a. declining-balance method. b. sum-of-the-years'-digit method. c. units-of-production method. d. straight-line method. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 54. The depreciation method in which the depreciable cost of an asset is apportioned equally over its estimated life in terms of months or years is called the a. declining-balance method. b. sum-of-the-years'-digit method. c. units-of-production method. d. straight-line method. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 55. The depreciation method using a steadily decreasing rate applied to the depreciable cost of the asset, resulting in successively smaller depreciation charges over the life of the asset is called the a. declining-balance method. b. sum-of-the-years'-digit method. c. units-of-production method. d. straight-line method. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 56. The depreciation method that estimates the number of units of service or output that can be provided by an asset and allocates the depreciable cost of the asset on the basis of the use or output during each period is called the a. declining-balance method. b. sum-of-the-years'-digit method. c. units-of-production method. d. straight-line method. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 57. Use the following data: Asset cost Expected life Estimated salvage value

$120,000 3 years $15,000

Using the straight-line method, the amount of depreciation each year would be a. $35,000. b. $40,000. c. $45,000. d. $15,000. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 2 min.

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Chapter 18—Accounting for LongTerm Assets 58. Use the following data: Asset cost Expected life Estimated salvage value

$80,000 3 years $10,000

Using the sum-of-the-year's-digits method, the amount of depreciation for the first year would be a. $26,666. b. $35,000. c. $20,000. d. $40,000. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 2 min. 59. Use the following data: Asset cost Expected life Estimated salvage value

$80,000 3 years $7,000

Using the declining-balance method, the amount of depreciation for the first year would be a. $26,666.67. b. $24,333.33. c. $53,333.33. d. $48,666.67. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 2 min.

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Chapter 18—Accounting for LongTerm Assets 60. Use the following data: Asset cost Expected life Estimated salvage value

$120,000 4 years $12,000

Using the sum-of-the-years-digit method, the amount of depreciation for the third year would be a. $28,000. b. $21,600. c. $30,000. d. $48,600. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 2 min. 61. A company purchased a van at a cost of $42,000 and expects it can be sold for $6,000 after 120,000 miles of service. Assuming the units-of-production method is used and the van is driven for 24,000 miles during the first year, the depreciation at the end of the first year would be a. $4,200. b. $1,200. c. $7,200. d. $12,000. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 2 min.

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Chapter 18—Accounting for LongTerm Assets 62. A farm tractor costing $80,000 is depreciated using the MACRS method. The tractor qualifies as a 3-year property, has a scrap value of $20,000, and is depreciated at the following rates: Year 1, 33.33%; Year 2, 44.45%; Year 3, 14.81%; and Year 4, 7.41%. The amount of depreciation to be entered for the second year would be a. $20,000. b. $26,670. c. $35,560. d. $44,450. ANSWER: c POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 2 min. 63. Under the Modified Accelerated Cost Recovery System (MACRS) depreciation method, the salvage value is a. added to the cost of the asset. b. ignored. c. subtracted from the cost of the asset. d. added to the straight-line depreciation. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 2 min.

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Chapter 18—Accounting for LongTerm Assets 64. Normal expenditures for repairs and maintenance to plant and equipment are accounted for by a. debiting Equipment and crediting Cash and Supplies Inventory. b. debiting Repairs Expense and crediting Cash and Supplies Inventory. c. debiting Cash and Supplies Inventory and crediting Repairs Expense. d. debiting Cash and Supplies Inventory and crediting Equipment. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.78 - LO: 18-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 2 min. 65. The accounting entry for additions and improvements that increase the usefulness of equipment includes a. debiting a liability account and crediting Building or Equipment. b. debiting Cash and crediting Building or Equipment. c. debiting Building or Equipment and crediting Cash or a liability account. d. debiting Building Expense or Equipment Expense and crediting Cash or a liability account. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.78 - LO: 18-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 2 min.

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Chapter 18—Accounting for LongTerm Assets 66. If an asset is being sold or exchanged, the gain or loss is always computed by comparing the a. market value and book value. b. market value and salvage value. c. book value and salvage value. d. market value and cost. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 67. Equipment that has no exchange or sales value, originally cost $875, and has depreciation totaling $700. The transaction to discard the equipment would result in a a. loss of $175. b. gain of $175. c. loss of $800. d. loss of $875. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 2 min.

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Chapter 18—Accounting for LongTerm Assets 68. A plant asset is fully depreciated when the book value is a. equal to the market value. b. equal to the salvage value. c. greater than the market value. d. greater than the salvage value. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 69. A personal computer that originally cost $5,000 has no estimated salvage value and was depreciated at the rate of 20% a year. At the end of the third year, the computer was sold for $1,500 cash. The transaction would result in a a. gain of $1,500. b. loss of $1,500. c. gain of $250. d. loss of $250. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 3 min.

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Chapter 18—Accounting for LongTerm Assets 70. A delivery truck that cost $26,000 has been owned for 3 years and is traded in for another delivery truck to be used for a similar purpose. Depreciation in the amount of $5,200 has been taken each year a total of $15,600. If the trade-in value of the old truck is $12,000 and the new truck has a fair market value of $30,000, the new truck would be recorded at a. $10,400. b. $12,000. c. $29,400. d. $30,000. ANSWER: d POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 3 min. 71. A printer that cost $600 and has been owned for 2 years is traded in for a new one. Depreciation in the amount of $120 had been taken each year. The new printer has a fair market value of $1,250. A trade-in allowance of $400 is granted, and the balance is paid in cash. The transaction to enter the exchanges of these two assets would result in the recognition of a. a gain of $40. b. a loss of $40. c. a gain of $200. d. neither a gain nor a loss. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 3 min.

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Chapter 18—Accounting for LongTerm Assets 72. A coal mine was acquired at a cost of $4,000,000. No salvage value was expected and the estimated number of units available for production was 4,000,000 tons. During the first year, 440,000 tons of coal was mined and sold. The depletion expense for the first year was a. $44,200. b. $440,000. c. $4,000,000. d. $4,400,000. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.82 - LO: 18-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 2 min. 73. A manufacturer or seller of a product may identify its merchandise and bar other manufacturers from using the same identification by obtaining a. a patent. b. a copyright. c. a trademark. d. letterhead stationery. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.83 - LO: 18-7 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 74. A truck was purchased on January 2 at a cost of $60,000. It is expected to be used for 5 years and to have a salvage value of $5,000 after 120,000 miles of service. The truck was driven 23,000 miles the first year and 25,000 miles the second year. Calculate the depreciation expense for the 1st and 2nd years.

Straight-line Declining-balance (double) Sum-of-the-years-digits' Units-of-production

Year 1 ________ ________ ________ ________

Year 2 ________ ________ ________ ________

ANSWER: Straight-line Declining-balance (double) Sum-of-the-years-digits' Units-of-production POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 10 min.

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Year 1 Year 2 $11,000.00 $11,000.00 24,000.00 14,400.00 18,333.33 14,666.67 10,541.67 11,458.33

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Chapter 18—Accounting for LongTerm Assets 75. Prepare the general journal entries for the following transactions. 20-a Jan. 2 Purchased land with a building on it for $750,000. The land is worth $300,000. Paid $150,000 down and signed a mortgage to be paid over 20 years. Dec. 31 Depreciation is computed using the straight-line method. The building has an estimated salvage value of $75,000 and an estimated life of 20 years. 20-b Jul. 1 The building and the land are sold for $825,000 cash. ANSWER:

20-a GENERAL JOURNAL Date Jan. 2 Land

Description

Page 1 Post Ref.

Building

Debit 300,000.00 450,000.00

Cash Mortgage Payable

150,000.00 600,000.00

Dec. 31 Depreciation Expense—Building Accumulated Depreciation—Building 20-b GENERAL JOURNAL Date Description July 1 Depreciation Expense—Building Accumulated Depreciation—Building 1 Cash Accumulated Depreciation—Building Gain on Sale of Plant Assets Land Building

Credit

18,750.00 18,750.00 Page 1 Post Ref.

Debit 9,375.00

Credit 9,375.00

825,000.00 28,125.00 103,125.00 300,000.00 450,000.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 10 min.

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Chapter 18—Accounting for LongTerm Assets 76. An oil field is purchased for $6,000,000. No salvage value is expected. The estimated recoverable amount of oil is 250,000 barrels. During the year just ended, 27,000 barrels of oil were extracted and sold. Required: 1. Compute the depletion rate. Show your computations. 2. Prepare the journal entry to recognize the depletion at the end of the year. ANSWER:

$6,000,000 ÷ 250,000 = $24 per barrel

2. GENERAL JOURNAL Date Description Dec. 31 Depletion Expense—Oil Field Accumulated Depletion—Oil Field

Page 1 Post Ref.

Debit 648,000.00

Credit 648,000.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 10 min.

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Chapter 18—Accounting for LongTerm Assets 77. A knitting machine, which had cost $210,000 and had accumulated depreciation of $147,000, was traded for a new knitting machine with a fair market value of $235,000. The old knitting machine and $180,000 in cash were given for the new knitting machine. Required: 1. Prepare the journal entry to record the exchange of these similar assets. 2. Assume a $63,000 trade-in allowance for the old knitting machine. Prepare the journal entry to record the exchange. ANSWER:

1. GENERAL JOURNAL Date

Page 1

Post Credit Description Ref. Debit Equipment (new) 235,000.00 Accumulated Depreciation—Equipment 147,000.00 Loss on Exchange of Equipment 8,000.00 Equipment (old) 210,000.00 Cash 180,000.00

2. GENERAL JOURNAL Date

Description Equipment (new) Accumulated Depreciation—Equipment Equipment (old) Cash

Page 1 Post Ref.

Debit 235,000.00 147,000.00

Credit

210,000.00 172,000.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.78 - LO: 18-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 10 min.

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Chapter 18—Accounting for LongTerm Assets 78. Prepare journal entries for the following transactions for Litton's Lilly Pond. Aug. 7 Replaced the engine in Tractor #1, paying cash, $7,200. Sept. 17 Paid cash for a tune-up of the engine in Tractor #2, $630. 25 Paid cash to add a front-end loader to Tractor #2, $15,300. GENERAL JOURNAL Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Date Description Aug. 7 Accumulated Depreciation—Tractors Cash Sept.

17 Repairs Expense Cash 25 Tractors Cash

Page 1 Post Ref.

Debit Credit 7,200.00 7,200.00 630.00 630.00 15,300.00 15,300.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.78 - LO: 18-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 10 min.

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Chapter 18—Accounting for LongTerm Assets 79. An asset is purchased on January 1 at a cost of $78,000. It is expected to be used for five years and have a salvage value of $8,000. Calculate the depreciation expense for each year of the asset's useful life under each of the following methods: a. b. c.

Straight-line method Double-declining-balance method Sum-of-the-years-digits' method

ANSWER:

a. Year 0 1 2 3 4 5

Annual Depreciation — $14,000 14,000 14,000 14,000 14,000

Ending Book Value $78,000 64,000 50,000 36,000 22,000 8,000

Year 0 1 2 3 4 5

Depreciable Cost — $78,000 × 40% 46,800 × 40% 28,080 × 40% 16,848 × 40% $10,109 − $8,000

Annual Depreciation — $31,200 18,720 11,232 6,739 2,109

Ending Book Value $78,000 46,800 28,080 16,848 10,109 8,000

Year 0 1 2 3 4 5

Depreciable Cost — $70,000 × 5/15 70,000 × 4/15 70,000 × 3/15 70,000 × 2/15 70,000 × 1/15

Annual Depreciation — $23,333 18,667 14,000 9,333 4,667

Ending Book Value $78,000 54,667 36,000 22,000 12,667 8,000

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Chapter 18—Accounting for LongTerm Assets 80. An asset is purchased on January 1 at a cost of $25,000. It is expected to be used for four years and have a salvage value of $1,000. Calculate the depreciation expense for each year of the asset's useful life under each of the following methods: a. b. c.

Straight-line method Double-declining-balance method Sum-of-the-years-digits' method

ANSWER:

a. Year 0 1 2 3 4

Annual Depreciation — $6,000 6,000 6,000 6,000

Ending Book Value $25,000 19,000 13,000 7,000 1,000

Year 0 1 2 3 4

Depreciable Cost — $25,000 × 50% 12,500 × 50% 6,250 × 50% $3,125 − $1,000

Annual Depreciation — $12,500 6,250 3,125 2,125

Ending Book Value $25,000 12,500 6,250 3,125 1,000

Year 0 1 2 3 4

Depreciable Cost — $24,000 × 4/10 24,000 × 3/10 24,000 × 2/10 24,000 × 1/10

Annual Depreciation — $9,600 7,200 4,800 2,400

Ending Book Value $25,000 15,400 8,200 3,400 1,000

POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 20 min. 81. Prepare journal entries for the following transactions for Sanchez Co. using the general journal. Feb. 28 Apr. 10

Machinery that cost $57,000 and had accumulated depreciation of $46,000 was sold for $2,500. A van that cost $23,700 and had accumulated depreciation of $21,000 was sold for

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Chapter 18—Accounting for LongTerm Assets

July 16

Aug. 11

Nov. 10

$1,250. Equipment that cost $120,000 and had accumulated depreciation of $112,000 was traded in for new equipment with a fair market value of $140,000. The old equipment and $135,000 in cash were given for the new equipment. Equipment that cost $50,000 and had accumulated depreciation of $43,000 was traded in for new equipment with a fair market value of $62,000. The old equipment and $55,000 in cash were given for the new equipment. A truck that cost $44,000 and had accumulated depreciation of $38,000 was traded in for a new truck with a fair market value of $58,000. The old truck and $50,000 cash were given for the new truck. GENERAL JOURNAL

Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Post Date Description Ref. Feb. 28 Cash Accumulated Depreciation—Machinery Loss on Sale of Machinery Machinery Cengage Learning Testing, Powered by Cognero

Page 1 Debit 2,500.00 46,000.00 8,500.00

Credit

57,000.00 Page 38

Chapter 18—Accounting for LongTerm Assets

Apr. 10 Cash Accumulated Depreciation—Van Loss on Sale of Van Van

1,250.00 21,000.00 1,450.00

July

16 Equipment (new) Accumulated Depreciation—Equipment Loss on Exchange of Equipment Cash Equipment (old)

140,000.00 112,000.00 3,000.00

Aug. 11 Equipment (new) Accumulated Depreciation—Equipment Cash Equipment (old)

62,000.00 43,000.00

Nov. 10 Truck (new) Accumulated Depreciation—Truck Cash Truck (old) Gain on Exchange of Truck

58,000.00 38,000.00

23,700.00

135,000.00 120,000.00

55,000.00 50,000.00

50,000.00 44,000.00 2,000.00

POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 30 min.

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Chapter 18—Accounting for LongTerm Assets 82. Assume that an asset costing $72,000 is expected to produce 500,000 units and have a salvage value of $6,000. The first year, 90,000 units are produced; the second year, 82,000 units are produced; the third year, 94,000 units are produced. Using the units-of-production method, complete the following:

Year 0 1 2 3

Depreciation Expense — ________ ________ ________

Book Value $72,000 ________ ________ ________

ANSWER: Year 0 1 2 3

Calculations — ($72,000 − $6,000)/500,000 × 90,000 ($72,000 − $6,000)/500,000 × 82,000 ($72,000 − $6,000)/500,000 × 94,000

Depreciation Expense — $11,880 10,824 12,408

Book Value $72,000 60,120 49,296 36,888

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.82 - LO: 18-6 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Applying NOTES: 10 min.

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Chapter 18—Accounting for LongTerm Assets 83. Prepare journal entries for the following transactions for Star Haulage Inc. Jan. 1 Feb. 13 19

Replaced the engine in Truck #1, paying cash, $5,400. Paid cash for a tune-up of the engine in Truck #2, $570. Paid cash to add a lift to Truck #2, $3,700. GENERAL JOURNAL

Date

Page 1 Post Ref.

Description

Debit

Credit

ANSWER: GENERAL JOURNAL ate D Description Jan. 1 Accumulated Depreciation—Trucks Cash Feb.

Page 1 Post Ref.

Debit 5,400.00

Credit 5,400.00

13 Repairs Expense Cash

570.00

19 Trucks Cash

3,700.00

570.00

3,700.00

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Chapter 18—Accounting for LongTerm Assets 84. The ____________________ depreciation method is based on the extent to which the asset was used during the year. ANSWER: units-of-production POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 85. The estimated market value of an asset on its expected disposal date is known as the ____________________. ANSWER: salvage value POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 86. A(n) ____________________ is a grant by the federal government to an inventor giving the exclusive right to produce, use, and sell an invention for a period of twenty years. ANSWER: patent POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.83 - LO: 18-7 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 87. Long-term assets that have no physical substance are ____________________. ANSWER: intangible assets POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 88. ____________________ is the portion of a plant asset's cost that is recognized as expense. ANSWER: Depreciation POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 89. The ____________________ is the amount of cash that could have been paid for the asset on the date of purchase. ANSWER: cash equivalent price POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 90. ____________________ is the portion of an intangible asset's cost that is recognized as expense. ANSWER: Amortization POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 91. ____________________ are assets whose physical substance consists of natural resources that are consumed in the operation of the business. ANSWER: Wasting assets POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 92. Depreciation is a process of ____________________, not a process of valuation. ANSWER: cost allocation POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.79 - LO: 18-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 93. ____________________ is the consumption or exhaustion of natural resources. ANSWER: Depletion POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 94. The ____________________ is the depreciation method in which the annual depreciation is determined by multiplying the depreciable cost by a schedule of fractions. ANSWER: sum-of-the-years'-digits method POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 95. If one asset is traded in on the purchase of another similar asset, a(n) ____________________ may be granted. ANSWER: trade-in allowance POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 96. The method of depreciation used for federal income tax purposes for plant assets acquired after 1986 is the ____________________. ANSWER:

Modified Accelerated Cost Recovery System MACRS POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 97. The cost of replacing minor parts, conducting normal maintenance, and cleaning are debited to the ____________________ account. ANSWER: Repairs Expense POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.78 - LO: 18-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 98. The federal grant giving the exclusive right to the reproduction and sale of a literary, artistic, or musical composition is called a(n) ____________________. ANSWER: copyright POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.83 - LO: 18-7 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 99. The practice of ____________________ states that when in doubt, choose the reporting technique that is least likely to overstate assets or net income. ANSWER: conservatism POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.81 - LO: 18-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 100. The loss of usefulness because of inadequacy or obsolescence is called ____________________ depreciation. ANSWER: functional POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.79 - LO: 18-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 101. The sum of all amounts spent to acquire an asset and prepare it for its intended use is the asset's ____________________. ANSWER: cost POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 102. The ____________________ method of depreciation spreads the depreciable cost of an asset equally over the years of the asset's useful life. ANSWER: straight-line POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 103. Cost minus accumulated depreciation equals ____________________. ANSWER: book value POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 104. A(n) ____________________ is a registered trade name or symbol that identifies a firm's merchandise. ANSWER: trademark POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.83 - LO: 18-7 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 18—Accounting for LongTerm Assets 105. The original cost less salvage (or scrap) value is the ____________________. ANSWER: depreciable cost POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 106. The two major types of depreciations are ____________________ and ____________________. ANSWER:

physical, functional functional, physical POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.80 - LO: 18-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 107. A(n) ____________________ asset is a long-term asset that has a physical substance. ANSWER: tangible POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.77 - LO: 18-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. Accelerated Cost Recovery System (ACRS) b. intangible assets c. Modified Accelerated Cost Recovery System (MACRS) d. book value e. cash equivalent price f. conservatism g. straight-line method Cengage Learning Testing, Powered by Cognero

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Chapter 18—Accounting for LongTerm Assets h. tangible assets i. depletion j. depreciable cost (base) k. trade-in allowance (trade value) l. double-declining-balance method m. functional depreciation n. units-of-production method DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.77 - LO: 18-1 COLL.HEIN.17.79 - LO: 18-2 COLL.HEIN.17.80 - LO: 18-3 COLL.HEIN.17.83 - LO: 18-7 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 108. The undepreciated cost of an asset (Cost − Accumulated Depreciation). ANSWER: d POINTS: 1 109. Long-term assets that have no physical substance. ANSWER: b POINTS: 1 110. The consumption or exhaustion of natural resources. ANSWER: i POINTS: 1 111. A depreciation method in which the depreciable cost of an asset is allocated equally over the years of the asset's useful life. ANSWER: g POINTS: 1 112. If one asset is traded in on the purchase of another similar asset, an allowance may be granted. ANSWER: k POINTS: 1 113. A method of depreciation used for federal income tax purposes for plant assets acquired after 1986. ANSWER: c POINTS: 1

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Chapter 18—Accounting for LongTerm Assets 114. An accelerated depreciation method in which the book value is multiplied by twice the straight-line rate. ANSWER: l POINTS: 1 115. The practice stating that when in doubt, choose the reporting technique that is least likely to overstate assets or net income. ANSWER: f POINTS: 1 116. The loss of usefulness because of inadequacy or obsolescence. ANSWER: m POINTS: 1 117. A depreciation method in which depreciation is based on the extent to which the asset was used during the year. ANSWER: n POINTS: 1 Match the terms with the definitions. a. Accelerated Cost Recovery System (ACRS) b. accelerated depreciation methods c. amortization d. trademark e. cash equivalent price f. long-term assets g. copyright h. cost i. patent j. depreciable cost (base) k. depreciation l. physical depreciation m. tangible assets n. sum-of-the-years'-digits method o. salvage value p. property, plant, and equipment DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.77 - LO: 18-1 COLL.HEIN.17.79 - LO: 18-2 COLL.HEIN.17.80 - LO: 18-3 COLL.HEIN.17.81 - LO: 18-5 COLL.HEIN.17.83 - LO: 18-7 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-13-Long-term Assets Reporting Cengage Learning Testing, Powered by Cognero

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Chapter 18—Accounting for LongTerm Assets KEYWORDS: Bloom's: Remembering NOTES: 1 min. 118. Long-term tangible assets that are used in the operations of the business. ANSWER: p POINTS: 1 119. The sum of all amounts spent to acquire an asset and prepare it for its intended use. ANSWER: h POINTS: 1 120. The portion of an intangible asset's cost that is recognized as expense. ANSWER: c POINTS: 1 121. A depreciation method in which the annual depreciation is determined by multiplying the depreciable cost by a schedule of fractions. ANSWER: n POINTS: 1 122. The estimated market value of an asset on its expected disposal date. ANSWER: o POINTS: 1 123. The portion of a plant asset's cost that is recognized as expense. ANSWER: k POINTS: 1 124. A registered trade name or symbol that identifies a firm's merchandise. ANSWER: d POINTS: 1 125. Assets that are expected to provide benefits for a number of accounting periods. ANSWER: f POINTS: 1 126. Depreciation methods that provide for a higher depreciation charge in the first year of an asset's life and gradually decreasing charges in subsequent years. ANSWER: b POINTS: 1 127. A federal grant of the exclusive right to the reproduction and sale of a literary, artistic, or musical composition. ANSWER: g POINTS: 1

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Chapter 18—Accounting for LongTerm Assets 128. The loss of usefulness because of deterioration from age and wear. ANSWER: l POINTS: 1 129. A grant by the federal government to an inventor giving the exclusive right to produce, use, and sell an invention for a period of twenty years. ANSWER: i POINTS: 1

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Chapter 19—Accounting for Partnerships 1. If the partnership cannot pay a bill, creditors will expect payment from the personal assets of the partners. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. The partnership form of organization is more popular among professional service enterprises than among merchandise enterprises. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. The Uniform Partnership Act states that a "corporation is an association of two or more persons who carry on, as co-owners, a business for profit." a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 4. It is desirable that a partnership agreement be evidenced by a written contract. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. A written agreement containing the various provisions under which a partnership is to operate is known as a partnership agreement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. If one partner contributes an asset to the business, the asset is jointly owned by all partners. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 7. Only one partner can be individually liable for all of the debts of the partnership. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. The interest of a partner in the partnership can be transferred freely without the consent of the other partners. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. Termination of the partnership agreement, bankruptcy of the firm, or death of one of the partners dissolves the partnership. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 10. Partner compensation is reported on the income statement but is not used to compute net income. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.85 - LO: 19-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. In opening the books for a partnership, it is customary to prepare a single journal entry for the investment of all partners. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. Partners may invest property or cash in the partnership, but only property increases their capital account balances. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 13. When two single proprietors decide to combine their businesses, generally accepted accounting principles usually require that noncash assets be recorded at their market value as of the date of formation of the partnership. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. Assuming there are no known bad debts when two single proprietors decide to combine their businesses, it is usual practice to enter the full amount of the Accounts Receivable as a debit and the amount of the Allowance for Bad Debts as a credit in placing each partner's investment in the books of the partnership. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. The basis on which profits and losses are to be shared is a matter of agreement between the partners and not necessarily the same as their investment ratio. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.85 - LO: 19-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 19—Accounting for Partnerships 16. The compensation of partners (other than their share of profits) may be in the form of salaries, royalties, commissions, or bonuses. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.85 - LO: 19-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. Partnerships are not subject to federal income taxes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. Since partners' salaries are not treated as an expense of the partnership, it is not necessary to keep a salary expense account for each partner. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.85 - LO: 19-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 19. If the partnership agreement does not state how profits and losses are to be shared, they are allocated according to the partners' capital interests. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.85 - LO: 19-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. When two sole proprietors decide to combine their businesses, assets should be recorded at their book value as of the date of formation of the partnership. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. Partners may agree that the most equitable method of allocating profits and losses is to base salaries on the services rendered by each partner. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.85 - LO: 19-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 19—Accounting for Partnerships 22. The allocation of net income and its impact on the partners' equity balances should be disclosed in the financial statements. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.86 - LO: 19-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. Only the income statement is affected by the allocation of net income in a partnership. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.86 - LO: 19-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. The statement of partners' equity reflects the equity of each partner and summarizes the allocation of net income for the year. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 25. One of the primary characteristics of the partnership form of organization is its limited liability. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. Partnerships file federal income tax returns for informational purposes and to notify partners of the amount of partnership income that must be reported on their individual federal income tax returns. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. For a new partner to be admitted to a partnership, there must be a consensus of the existing partners. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 28. The admission of a new partner calls for the amendment of the old partnership agreement, but not dissolve the old partnership. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. The book value of a partner's interest is shown by the credit balance of the partner's capital account, after all profits or losses have been allocated in accordance with the partnership agreement, and the books have been closed. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. If a retiring partner agrees to withdraw less than the book value of his/her interest, the effect of the transaction will decrease the capital accounts of the remaining partners. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 19—Accounting for Partnerships 31. If a partner is permitted to withdraw more than the book value of his/her interest, the effect of the transaction will increase the capital accounts of the remaining partners. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. When a partner retires from the business, the partner's interest may be purchased by one or more of the remaining partners or by an outside party. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. If the retiring partner's interest is sold to one of the remaining partners, the retiring partner's equity is merely transferred to the other partner. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 19—Accounting for Partnerships 34. Partners are taxed on the amount withdrawn, not on their share of net income. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. Liquidation of a partnership usually means that assets are sold, liabilities are paid, and remaining cash is distributed to the partners. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.88 - LO: 19-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. Under the laws of some states, all partners may limit their liability for the debts of the partnership. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 37. In the liquidation of the partnership, adjusting and closing entries are made when normal operations are discontinued. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.88 - LO: 19-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. In the liquidation of the partnership, the first cash realized is allocated to the creditors. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.88 - LO: 19-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 39. A gain on the sale of assets in the liquidation process is recognized and allocated to the partners' capital accounts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.88 - LO: 19-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 40. When two or more individuals engage in an enterprise as co-owners, the organization is known as a a. single proprietorship. b. corporation. c. partnership. d. closed corporation. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 41. After closing the temporary owners' equity accounts into Income Summary, and after allocating the net income and closing the partners' drawing accounts, assume the partners' capital accounts had credit balances as follows: Ryan, $40,000; O'Malley, $60,000; Sullivan, $45,000. Partners share profits and losses as follows: Ryan, 20%; O'Malley, 30%; and Sullivan, 50%. If Sullivan retired and withdrew $40,000 in settlement of his/her equity and settlements are allocated according to capital interests, the amount entered in Ryan's capital account would be a a. $2,000 credit. b. $2,000 debit. c. $3,000 credit. d. $3,000 debit. ANSWER: a POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 42. "Limited life" means a. a partnership may be dissolved as the result of any change in the ownership. b. a partnership may be dissolved if the location of the business is changed. c. a partnership is limited to the amount of net income it can earn. d. a partnership is limited in the amount of debt it is liable for in the course of the business. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 43. A disadvantage that is NOT peculiar to the partnership form of organization includes a. each partner is individually liable for all of the debts of the partnership. b. the interest of a partner in the partnership cannot be transferred without the consent of the other partners. c. termination of the partnership agreement, bankruptcy of the firm, or death of one of the partners dissolves the partnership. d. the partners do not make the decisions that run the business. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 44. Bernstein invests office equipment with a fair market value of $62,000, delivery equipment with a fair market value of $75,000, and cash of $30,000. He owes $27,000, represented by a note on the delivery equipment. The amount of Bernsteins' capital would be a. $30,000. b. $167,000. c. $140,000. d. $137,000. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 1 min. 45. After closing the temporary owners' equity accounts into Income Summary, and after allocating the net income and closing the partners' drawing accounts, assume the partners' capital accounts had credit balances as follows: Sanchez, $20,000; Dorvinsky, $30,000; Davenport, $45,000. Partners share profits and losses as follows: Sanchez, 20%; Dorvinsky, 30%; and Davenport, 50%. If Davenport retired and withdrew $40,000 in settlement of his/her equity and settlements are allocated according to capital interests, the amount entered in Dorvinsky's capital account would be a a. $2,000 credit. b. $2,000 debit. c. $3,000 credit. d. $3,000 debit. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 46. Delisa invests office equipment with a fair market value of $70,000, delivery equipment with a fair market value of $89,000, and cash of $54,000. She owes $68,000, represented by a note on the delivery equipment. If Delisa's office equipment cost $80,000 and has accumulated depreciation of $30,000, the amount at which the asset should be entered on the books of the new partnership would be a. $50,000. b. $70,000. c. $80,000. d. $89,000. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 1 min. 47. Partners are taxed on a. the amount of cash they withdraw from the company. b. their share of the net profit of the company. c. the total amount of the net profit of the company. d. the gross sales of the company. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 48. "Mutual agency" means that a. a partnership has a limited life. b. any partner can bind the other partners to a contract. c. each partner is personally liable for all debts. d. partnerships are not subject to federal income taxes. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 49. Dissolution of a partnership a. implies that the business operations will halt. b. occurs when there is any change in the members of the partnership. c. implies that the business cannot continue with a new group of partners. d. implies that the business cannot form a different ownership structure. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 50. The basis on which profits and losses are to be shared between partners is a. a matter of agreement between the partners. b. the same as their investment ratio. c. the same as their withdrawal ratio. d. always equal between all partners. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.85 - LO: 19-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 51. After closing the temporary owners' equity accounts into Income Summary, and after allocating the net income and closing the partners' drawing accounts, assume the partners' capital accounts had credit balances as follows: Rhodes, $40,000; Serrata, $60,000; Shepard, $75,000. Partners share profits and losses as follows: Rhodes, 20%; Serrata, 30%; and Shepard, 50%. If Shepard retired and withdrew $85,000 in settlement of his equity and settlements are allocated according to capital interests, the amount entered in Rhodes' capital account would be a a. $4,000 debit. b. $4,000 credit. c. $6,000 debit. d. $6,000 credit. ANSWER: a POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 52. In the absence of any agreement between partners, profits and losses must be shared a. equally among all partners. b. on the basis of the ratio of the partners' investment. c. on the basis of the ratio of the partners' withdrawal. d. in accordance with the Uniform Partnership Act. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.85 - LO: 19-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 53. In comparison with the single proprietorship form of organization, the partnership form offers which of the following advantages? a. simple transfer of interest in the partnership to outsiders b. combination of ability and experience of the partners c. legal liability of each partner for all the debts of the partnership d. limited life ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 54. When two proprietors decide to combine their businesses, generally accepted accounting principles usually require that noncash assets be taken over at their a. historical cost value as of the date of formation. b. fair market value as of the date of formation. c. book value as of the date of formation. d. residual value as of the date of formation. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 55. If two or more sole proprietors combine their businesses to form a partnership, the basis for the opening entries for the investments of such partners is based upon their respective a. balance sheet. b. income statement. c. statement of owner's equity. d. cash flow statement. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 56. The allocation of net income and its impact on partners' equity balances should be disclosed on the a. income statement. b. balance sheet. c. statement of partners' equity. d. work sheet. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.86 - LO: 19-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 57. When a new partner is admitted, a. the old partnership continues to exist and the name of the new partner is added. b. the old partnership is dissolved and a new one is created. c. the old partnership is dissolved and a new form of ownership must be chosen. d. the old partnership continues to exist and the new partner invests in the existing business. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 58. After closing the temporary owners' equity accounts into Income Summary, and after allocating the net income and closing the partners' drawing accounts, assume the partners' capital accounts had credit balances as follows: Zott, $45,000; Payne, $60,000; Tejada, $47,000. If Tejada retired and withdrew $47,000 in settlement of his equity, the debit to his capital account would be in the amount of a. $60,000. b. $58,000. c. $47,000. d. $94,000. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 1 min. 59. After closing the temporary owners' equity accounts into Income Summary, and after allocating the net income and closing the partners' drawing accounts, assume the partners' capital accounts had credit balances as follows: Golden, $30,000; Chavez, $40,000; McGinnis, $55,000. If McGinnis retired and withdrew $50,000 in settlement of his/her equity, the amount entered in McGinnis's capital account would be a a. $5,000 credit. b. $50,000 credit. c. $55,000 debit. d. $55,000 credit. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 2 min.

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Chapter 19—Accounting for Partnerships 60. After closing the temporary owners' equity accounts into Income Summary, and after allocating the net income and closing the partners' drawing accounts, assume the partners' capital accounts had credit balances as follows: Boswell, $40,000; Aikido, $60,000; Cooke, $55,000. Partners share profits and losses as follows: Boswell, 20%; Aikido, 30%; and Cooke, 50%. If Cooke retired and withdrew $65,000 in settlement of his equity and settlements are allocated according to capital interests, the amount entered in Aikido's capital account would be a a. $4,000 debit. b. $4,000 credit. c. $6,000 debit. d. $6,000 credit. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 2 min. 61. All assets held by a partnership are a. co-owned by all partners. b. owned by the partner(s) who purchased the assets. c. owned by the partners based on the percentage of their investment in the business. d. owned by the partnership. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 62. After closing the temporary owners' equity accounts into Income Summary, and after allocating the net income and closing the partners' drawing accounts, assume the partners' capital accounts had credit balances as follows: Yang, $20,000; Wolfe, $30,000; Stamatis, $45,000. Partners share profits and losses as follows: Yang, 20%; Wolfe, 30%; and Stamatis, 50%. If Yang purchased Stamatis's interest in the partnership for $40,000 cash, the amount entered in Yang's capital account is a a. $5,000 debit. b. $40,000 debit. c. $40,000 credit. d. $45,000 credit. ANSWER: d POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 2 min. 63. After closing the temporary owners' equity accounts into Income Summary, and after allocating the net income and closing the partners' drawing accounts, assume the partners' capital accounts had credit balances as follows: Peluso, $20,000; Odin, $30,000; Nazaro, $45,000. Partners share profits and losses as follows: Peluso, 20%; Odin, 30%; and Nazaro, 50%. If Peluso purchased Nazaro's interest in the partnership for $40,000 cash, the amount entered in Nazaro's capital account is a a. $5,000 debit. b. $40,000 debit. c. $40,000 credit. d. $45,000 debit. ANSWER: d POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 2 min.

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Chapter 19—Accounting for Partnerships 64. When a partnership is liquidated, the assets are sold and the cash realized is applied first to the a. partners' equity accounts. b. claims of creditors. c. partner with the largest investment in the partnership. d. partners according to their ownership interest as indicated by their capital account. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.88 - LO: 19-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 65. J. O'Keefe and J. Kisha combined for a 50/50 partnership in 1980 and continued to do business successfully for many years. In January 2011, J. Kimley offered to contribute a sizable amount of working capital and was accepted as a partner in the business. J. O'Keefe and J. Kisha each own 40% of the business and J. Kimley 20% of the business partnership. Profits and losses are to be shared according to these percentages. Due to the lagging economy and a sudden loss of profits, all three agree to liquidate the business and enjoy a gain on the sale of their major asset, which was purchased in 1981. This should be distributed a. 50% to J. O'Keefe; 50% to J. Kisha. b. 40% to J. O'Keefe; 40% to J. Kisha; 20% to J. Kimley. c. equally among the three partners at the time of the sale. d. 100% into the partnership dissolution revenue account. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.88 - LO: 19-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 66. Which of the following is an incorrect step in the process of liquidation? a. sell the assets b. allocate gains or losses to partners c. close all accounts payable d. pay any liabilities ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.88 - LO: 19-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 19—Accounting for Partnerships 67. Kristin Anastra and Jesse Turnbull agreed on September 1 to go into business as partners. According to the agreement, Anastra is to contribute $80,000 cash and Turnbull is to contribute $75,000 cash. Required: Provide a separate journal entry for the investment of each partner. GENERAL JOURNAL Date

Page 1 Post Ref.

Description

Debit

Credit

ANSWER: GENERAL JOURNAL Date Sept. 1

Description Cash Kristin Anastra, Capital Cash Jesse Turnbull, Capital

Page 1 Post Ref.

Debit 80,000.00

Credit 80,000.00

75,000.00 75,000.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 2 min.

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Chapter 19—Accounting for Partnerships 68. Kate DeLeo and Joe Desmond decided to form a partnership on January 1. DeLeo invested $50,000 and Desmond invested $30,000. On December 31, the end of the fiscal year, a net income of $100,000 was earned. Required: Determine the amount of net income that DeLeo and Desmond would receive under each of the following independent assumptions: a. There is no agreement concerning the distribution of net income. b. Each partner is to receive 10% on their original investment, and the remainder divided equally. c. DeLeo and Desmond are to receive a salary allowance of $35,000 and $45,000 respectively, and the remainder divided equally. d. Each partner is to receive 10% on their original investment, DeLeo and Desmond are to receive a salary allowance of $30,000 and $40,000 respectively, and the remainder divided as follows: 60% to DeLeo and 40% to Desmond. DeLeo

Total

Desmond $50,000 $50,000

$100,000

b. Interest on original investment (10%) Remainder

$ 5,000 46,000 $51,000

$ 3,000 46,000 $49,000

$ 8,000 92,000 $100,000

c. Salary allowance Remainder

$35,000 10,000 $45,000

$45,000 10,000 $55,000

$ 80,000 20,000 $100,000

d. Interest on original investment (10%) Salary allowance Remainder (60% ÷ 40%)

$ 5,000 30,000 13,200 $48,200

$ 3,000 40,000 8,800 $51,800

$ 8,000 70,000 22,000 $100,000

ANSWER: a. Divided equally

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.85 - LO: 19-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 10 min.

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Chapter 19—Accounting for Partnerships 69. Meghan Kornett and James Higgins formed a partnership on January 1, 20--. Kornett contributed $70,000 and Higgins contributed $40,000. During the year, Kornett contributed an additional $20,000. The partnership agreement states that Kornett is to receive $50,000 and Higgins is to receive $40,000 as a salary allowance. Any remaining net income is to be divided as follows: Kornett 65%, Higgins 35%. For the fiscal year ending December 31, 20--, the partnership earned $140,000 in net income. The partners withdrew only the salary portion of their compensation during the first year of operation. Required: a. Prepare the lower portion of the income statement showing the allocation of net income between Kornett and Higgins for the year. b. Prepare a statement of partners' equity, showing each individual partner's equity for the year. ANSWER: Kornett and Higgins Income Statement (partial) For the Year Ended December 31, 20-Net income Allocation of net income: Salary allowance Remaining income (65% ÷ 35%)

$140,000 Kornett $50,000 32,500 $82,500

Higgins $40,000 17,500 $57,500

Kornett and Higgins Statement of Partners' Equity For the Year Ended December 31, 20-Kornett Higgins Capital, January 1, 20-$ 70,000 $40,000 Additional investment for the year 20,000 0 $ 90,000 $40,000 Net income for the year 82,500 57,500 $172,500 $97,500 Withdrawals 50,000 40,000 Capital, December 31, 20-$122,500 $57,500 POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.86 - LO: 19-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 15 min.

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Total $ 90,000 50,000 $140,000

Total $110,000 20,000 $130,000 140,000 $270,000 90,000 $180,000

Page 30

Chapter 19—Accounting for Partnerships 70. Yon Haggerdorf and Sue Lee, who have ending capital balances of $80,000 and $60,000, respectively, agree to admit two new partners to their business on April 1, 20--. Carlos Sanchez will buy 1/4 of Haggerdorf's equity interest for $20,000 and 1/3 of Lee's equity interest for $25,000 directly from the partners. Carmen Della will invest $30,000 in the business for which she is to receive a $30,000 equity interest. Required: a. Prepare general journal entries showing the above transactions admitting Sanchez and Della to the partnership. b. Calculate the ending capital balances for all four partners after the above transactions. GENERAL JOURNAL Date

Description

ANSWER:

Page 1 Post Ref.

Debit

Credit

GENERAL JOURNAL Description Date Apr. 1 Yon Haggerdorf, Capital Sue Lee, Capital Carlos Sanchez, Capital 1 Cash Carmen Della, Capital

Page 1 Post Ref.

Debit 20,000.00 20,000.00

Credit

40,000.00 30,000.00 30,000.00

b. Ending capital balances as of April 1, 20--. Carmen Della Yon Haggerdorf Sue Lee Carlos Sanchez POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 15 min.

30,000 60,000 40,000 40,000

71. Soo Yung and Saul Gazza agree to admit Millie Hillsberg into their partnership. The balance sheet of Hillsberg's business as of September 30 is shown below: Cengage Learning Testing, Powered by Cognero

Page 31

Chapter 19—Accounting for Partnerships Hillsberg's Balance Sheet September 30, 20-Assets Cash Accounts receivable Less allowance for bad debts Merchandise. inventory Total assets Liabilities Accounts payable

$25,000 $32,000 1,000

31,000 41,000 $97,000 $17,000

Owner's Equity Millie Hillsberg, capital Total liabilities and owner's equity

80,000 $97,000

Yung, Gazza, and Hillsberg agree that the amounts reported on Hillsberg's balance sheet are reasonable approximations of market value. Yung and Gazza agree to purchase all business assets, except cash, and all business liabilities were assumed, in exchange for a $55,000 interest in their partnership. Required: Prepare the journal entry showing Hillsberg's investment in the partnership of Yung and Gazza, as of October 1, 20--. GENERAL JOURNAL Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Date Description Oct. 1 Accounts Receivable Merchandise Inventory Allowance for Bad Debts Accounts Payable Millie Hillsberg, Capital

Page 1 Post Ref.

Debit 32,000.00 41,000.00

Credit

1,000.00 17,000.00 55,000.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting Cengage Learning Testing, Powered by Cognero

Page 32

Chapter 19—Accounting for Partnerships KEYWORDS: NOTES:

Bloom's: Applying 10 min.

72. After several years of operation, the partnership of Raimondo, Rodriguez, and Rosenfeld is being liquidated. After making closing entries on September 30, 20--, the following accounts remain open: Cash 18,000 Merchandise inventory 73,000 Other assets 157,000 Accounts payable 61,000 M. A. Raimondo, capital 50,000 M. E. Rodriguez, capital 50,000 C. R. Rosenfeld, capital 87,000 The noncash assets are sold for $275,000. Profits and losses are shared equally. Required: Prepare journal entries for the following transactions: a. The sale of the noncash assets on October 1. b. Payment of the liabilities on October 15. c. Division of the remaining cash on October 20. ANSWER:

a. GENERAL JOURNAL Date Oct. 1

Description Cash Merchandise Inventory Other Assets Gain on Sale of Assets

Page 1 Post Ref.

Debit 275,000.00

Credit 73,000.00 157,000.00 45,000.00

Gain on Sale of Assets M. A. Raimondo, Capital M. E. Rodriguez, Capital C. R. Rosenfeld, Capital

45,000.00 15,000.00 15,000.00 15,000.00

b. GENERAL JOURNAL Description Date Oct. 15 Accounts Payable Cash

Page 1 Post Ref.

Debit 61,000.00

Credit 61,000.00

c. GENERAL JOURNAL Description Date Oct. 20 M. A. Raimondo, Capital M. E. Rodriguez, Capital Cengage Learning Testing, Powered by Cognero

Page 1 Post Ref.

Debit 65,000.00 65,000.00

Credit

Page 33

Chapter 19—Accounting for Partnerships C. R. Rosenfeld, Capital Cash

102,000.00 232,000.00

POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.88 - LO: 19-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 15 min. 73. Maureen Knipper and Jordan Klein have been sole proprietors of separate animal relocation businesses for several years. On January 1, 20--, they form a partnership called K & K Animal Kingdom. The following balance sheets provided for each business serve as the basis for the partnership: Maureen Knipper Balance Sheet December 31, 20-Assets Cash Accounts receivable Less allow. for bad debts Office equipment Less accum. depr. Vehicles Less accum. depr.

Liabilities Accounts payable Notes payable 1,500 Total liabilities

$ 2,300 $ 1,940 440 $20,900 1,000 19,900 $26,900 5,000 21,900

$6,840 14,500 $21,340

Owner's Equity Maureen Knipper, capital Total liabilities and $45,600 owner's equity

Total assets

24,260

$45,600

Jordan Klein Balance Sheet December 31, 20-Assets Cash Accounts receivable Less allow. for bad debts Equipment Less accum. depr. Vehicles Less accum. depr. Office equipment Less accum. depr. Total assets

Liabilities $ 2,545 Accounts payable $ 2,270 Notes payable 370 1,900 Total liabilities $16,350 2,300 14,050 $17,500 Owner's Equity 3,200 14,300 Jordan Klein, $ 6,500 capital 2,000 4,500 Total liabilities and $37,295 owner's equity

$6,000 7,300 $13,300

23,995

$37,295

Knipper and Klein agree that the information provided on the balance sheets represents market values, except for the assets listed below for which appraisals of current market values were obtained. Fair Market Values Cengage Learning Testing, Powered by Cognero

Knipper

Klein Page 34

Chapter 19—Accounting for Partnerships Office equipment Vehicles

$19,900 21,000

$ 4,100 13,900

Required: Prepare the opening journal entries for the formation of K & K Animal Kingdom. GENERAL JOURNAL Date

Page 1 Post Ref.

Description

Debit

Credit

ANSWER: GENERAL JOURNAL Date Jan.

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Description Cash Accounts Receivable Office Equipment Vehicles Allowance for Bad Debts Accounts Payable Notes Payable Maureen Knipper, Capital Cash Accounts Receivable Equipment Vehicles Office Equipment Allowance for Bad Debts

Page 1 Post Ref.

Debit 2,300.00 1,940.00 19,900.00 21,000.00

Credit

440.00 6,840.00 14,500.00 23,360.00 2,545.00 2,270.00 14,050.00 13,900.00 4,100.00 370.00 Page 35

Chapter 19—Accounting for Partnerships Accounts Payable Notes Payable Jordan Klein, Capital

6,000.00 7,300.00 23,195.00

POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 20 min. 74. Steve and Heather decided to form a partnership on April 1. Steve invested $60,000 and Heather invested $40,000. Net income for the fiscal year ended March 31 was $110,000. Each partner is to receive 10% on their original investment. Steve and Heather are to receive a salary allowance of $35,000 and $45,000, respectively. The remainder is to be divided as follows: 70% to Steve and 30% to Heather. Determine the amount of net income that Steve and Heather would have received. ANSWER:

Steve Heather

Total $110,000

$35,000 6,000 14,000 $55,000

80,000 10,000 20,000 $110,000

Net income Salary allowances Interest allowances Remaining income (70% ÷ 30%) Total of each column POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.85 - LO: 19-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 10 min.

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$45,000 4,000 6,000 $55,000

Page 36

Chapter 19—Accounting for Partnerships 75. After many years of operation, the partnership of O'Toole, Simpkins, and Fein is to be liquidated. The September 30, 20-- post-closing trial balance for the partnership is provided below: O'Toole, Simpkins, and Fein Post-Closing Trial Balance September 30, 20-Cash Inventory Other assets Liabilities S. O'Toole, capital O. Simpkins, capital S. Fein, capital

$ 15,200 31,000 84,000

________ $130,200

$ 9,000 42,000 41,000 38,200 $130,200

Profits and losses are shared equally. The noncash assets are sold for $121,000 on October 1. Final cash settlements are made to the partners following the payment of all liabilities. Complete the statement of partnership liquidation that has been provided. Other O'Toole, Simpkins, Fein, Cash Inventory Assets Liabilities Capital Capital Capital $ 15,200 $ 31,000 $ 84,000 $ 9,000 $ 42,000 $ 41,000 $ 38,200 ________ ________ ________ ______ ________ ________ ________ ________ ________ ________ ______ ________ ________ ________ ________ ________ ________ ______ ________ ________ ________ ________ ________ ________ ______ ________ ________ ________ ________ ________ ________ ______ ________ ________ ________ ANSWER: Other O'Toole, Simpkins, Fein, Cash Inventory Assets Liabilities Capital Capital Capital $ 15,200 $ 31,000 $ 84,000 $ 9,000 $ 42,000 $ 41,000 $ 38,200 121,000 (31,000) (84,000) ______ 2,000 2,000 2,000 $ 136,200 $ 0 $ 0 $ 9,000 $ 44,000 $ 43,000 $ 40,200 (9,000) ________ ________ (9,000) ________ ________ ________ $ 127,200 $ 0 $ 0 $ 0 $ 44,000 $ 43,000 $ 40,200 (127,200) ________ ________ _______ (44,000) (43,000) (40,200 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 15 min. 76. The Green Meadows Landscaping Company, a partnership, operates a commercial landscaping business. Ownership Cengage Learning Testing, Powered by Cognero

Page 37

Chapter 19—Accounting for Partnerships of the company is divided among the partners, Brandon Boskin, Collin Chang, and Dan Delia. On May 28, after the business had been in operation for several years, Delia passed away. His widow wishes to unload her late husband's share of the business and head for Jamaica. After the books were closed, the partners' capital accounts had credit balances as follows: Brandon Boskin, Capital Collin Chang, Capital Dan Delia, Capital a. b.

$80,000 40,000 40,000

Assume that Boskin has decided to buy Delia's share from his widow for $35,000 and Chang also agrees to this arrangement. Assume that Boskin and Chang have decided that the partnership will pay Delia's widow $46,000 with any difference distributed between the remaining partners based on their current capital balances. Assume that Boskin and Chang have decided that the partnership will pay Delia's widow $25,000 with any difference distributed between the remaining partners based on their current capital balances.

Required: Prepare the general journal entry that would be shown on the partnership's books for each independent situation. ANSWER:

a. GENERAL JOURNAL Description Date May 28 Dan Delia, Capital Brandon Boskin, Capital

Page 1 Post Ref.

Debit 40,000.00

Credit 40,000.00

b. GENERAL JOURNAL Description Date May 28 Dan Delia, Capital Brandon Boskin, Capital Collin Chang, Capital Cash

Page 1 Post Ref.

Debit 40,000.00 4,000.00 2,000.00

Credit

46,000.00

c. GENERAL JOURNAL Description Date May 28 Dan Delia, Capital Brandon Boskin, Capital Collin Chang, Capital Cash

Page 1 Post Ref.

Debit 40,000.00

Credit 10,000.00 5,000.00 25,000.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic Cengage Learning Testing, Powered by Cognero

Page 38

Chapter 19—Accounting for Partnerships TOPICS: KEYWORDS: NOTES:

ACBSP: APC-19-Partnership Accounting Bloom's: Applying 15 min.

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Page 39

Chapter 19—Accounting for Partnerships 77. Sasha McBride and Ian Jordan, who have ending capital balances of $90,000 and $40,000 respectively, agree to admit two new partners to their business on May 1, 20--. Paul Menendez will buy 30% of McBride's equity interest for $35,000 and 20% of Jordan's equity interest for $22,000. Alice Domski will invest $38,000 in the business for which she will receive a $38,000 equity interest. Required: 1. Prepare the journal entries showing the above transactions admitting Menendez and Domski to the partnership. 2. Calculate the ending capital balances for all four partners after the above transactions. GENERAL JOURNAL Date

Description

ANSWER:

Page 1 Post Ref.

Debit

Credit

GENERAL JOURNAL Description Date May 1 Sasha McBride, Capital Ian Jordan, Capital Paul Menendez, Capital 1 Cash Alice Domski, Capital 2. Ending balances as of May 1, 20--. S. McBride $63,000 P. Menendez 35,000 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Applying NOTES: 10 min.

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Page 1 Post Ref.

Debit 27,000.00 8,000.00

Credit

35,000.00 38,000.00 38,000.00

I. Jordan A. Domski

$32,000 38,000

Page 40

Chapter 19—Accounting for Partnerships 78. ____________________ of the partnership results from any change in the members of the partnership. ANSWER: Dissolution POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.87 - LO: 19-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 79. The ____________________ is a written document containing the various provisions for operating a partnership. ANSWER: partnership agreement POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 80. ____________________ means that any partner can bind the other partners in a contract if he or she is acting within the general scope of the business. ANSWER: Mutual agency POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.84 - LO: 19-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 41

Chapter 19—Accounting for Partnerships 81. The process of selling the assets, paying the liabilities, and distributing the remaining cash or other assets to the partners is known as ____________________. ANSWER: liquidation POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.88 - LO: 19-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. dissolution b. liquidation c. partnership d. partnership agreement DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.84 - LO: 19-1 COLL.HEIN.17.87 - LO: 19-4 COLL.HEIN.17.88 - LO: 19-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-19-Partnership Accounting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 82. The form of organization in which two or more individuals engage in an enterprise as co-owners. ANSWER: c POINTS: 1 83. Dissolving of the partnership resulting from any change in the members of the partnership. ANSWER: a POINTS: 1 84. A process of selling the assets, paying the liabilities, and distributing the remaining cash or other assets to the partners. ANSWER: b POINTS: 1 85. A written agreement containing the various provisions for operating a partnership. ANSWER: d POINTS: 1 Cengage Learning Testing, Powered by Cognero

Page 42

Chapter 20—Corporations: Organization and Capital Stocks 1. Change in ownership through transfer of shares or death of owners ends the life of a corporation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. Stocks that carry certain specified preferences, or first claims, are called common stock. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. Stated value is a value assigned to each share by the corporate president and printed on the stock certificate. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 1

Chapter 20—Corporations: Organization and Capital Stocks 4. A corporation's life is specified in its charter. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. Stock certificates are issued when the corporation receives a capital stock subscription. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. Shares of stock that have been reacquired by the issuing company are called treasury stock and the treasury stock account is debited for the cost. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 2

Chapter 20—Corporations: Organization and Capital Stocks 7. Limited liability of the owners means that the stockholders of a corporation share a personal liability for all debts of the corporation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. Usually, any stockholder can transfer stock to another person without the knowledge or the consent of the other stockholders, as long as they have received permission from the corporation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. Corporations are chartered either with perpetual life or with the provision for renewal if the charter specifies a limit, irrespective of the deaths of any stockholders, or disposal of their stock. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

Page 3

Chapter 20—Corporations: Organization and Capital Stocks 10. A major disadvantage of the corporate form of organization is the manner in which corporations pay income taxes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. Double taxation is the process of taxing corporate income both to the company that earns it and to the stockholders of the company who receive it. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. One of the major advantages of the corporate form of ownership is the relaxation of governmental regulations. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 4

Chapter 20—Corporations: Organization and Capital Stocks 13. The certificate of incorporation is frequently referred to as the bylaws. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. A major disadvantage of a corporation is that it must pay income taxes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. The total number of shares the corporate charter allows a corporation to issue is called authorized stock. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 5

Chapter 20—Corporations: Organization and Capital Stocks 16. The price at which a share of capital stock may be purchased or sold on the open market is described as its par value. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. The stockholders elect a board of directors and the board determines corporate policies and selects the corporate officers. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. There are more businesses organized as corporations than as sole proprietorships and partnerships in the United States. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

Page 6

Chapter 20—Corporations: Organization and Capital Stocks 19. In the stockholders' equity section of a corporation's balance sheet, stockholders' equity and paid-in capital are separated by source. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.92 - LO: 20-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. In the stockholders' equity section of a corporation's balance sheet, preferred stock is listed before common stock because of its preferred claim to dividends and/or assets. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.92 - LO: 20-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. It is a common practice to amortize organizational costs over a period of five to ten years. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 7

Chapter 20—Corporations: Organization and Capital Stocks 22. If there is only one class of stock outstanding, such stock would be classified as preferred stock. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. Preferred stock usually has voting rights. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. Treasury stock refers to the shares of stock that have been reacquired by the issuing corporation and that have not been formally canceled. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 25. Corporations rarely issue stock at a discount because firms generally set very low par values and the practice is even illegal in many states. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. When a corporation issues stock for noncash assets, it records the transaction at the fair market value of the assets or of the stock, whichever can be more clearly determined. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. Dividends are equivalent to withdrawals in a sole proprietorship or partnership. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 28. Most preferred stock currently being issued is participating, while it is very unusual to find the cumulative feature in preferred stock today. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. When common stock is issued at a premium, Paid-In Capital in Excess of Par-Common Stock is credited. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. If preferred dividends are limited to the stated dividend rate, the stock is said to be participating. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 31. No-par stock that is assigned a stated value by the board of directors is accounted for in virtually the same way as par value stock. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. The right of a stockholder to purchase additional shares in proportion to the owner's present holdings, if more shares are issued by the corporation, is known as a preemptive right. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. The account that represents the accumulated earnings of the corporation that have not been paid out to stockholders as dividends is called Paid In Capital in Excess of Par. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 20—Corporations: Organization and Capital Stocks 34. When preferred stock has a dividend preference, it is usually stated as a dollar amount per share or as a percentage of par value. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. Preferred stock is stock that gives its owner certain preferences or rights superior to those of common stock. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. The officers of the corporation generally manage the business and are responsible to the board of directors. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 37. Incorporation fees, attorneys' fees, and promotional expenses are known as organization costs and are expensed in the first two years of operation of the corporation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. If there is an equal division of any excess dividends between the preferred shares and common shares, without any limit as to the amount the preferred shares may receive, the preferred stock is said to be nonparticipating. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 39. Preferred stock on which the unpaid dividends for one year are added to dividends to be received the following year is called cumulative. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 20—Corporations: Organization and Capital Stocks 40. When a corporation sells its capital stock, certificates are issued to the stockholders and the stock is said to be issued and outstanding. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 41. Treasury Stock is a company investment in its own stock and is reported as an asset. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 42. The stockholders' equity section of the corporate balance sheet is separated into paid-in capital and retained earnings. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.92 - LO: 20-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 43. Paid-in capital from sale of treasury stock could appear as an addition or deduction on the stockholders' equity section of the balance sheet. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.92 - LO: 20-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 44. Because corporations are chartered either with perpetual life or with provision for renewal if the charter specifies a limit, irrespective of the deaths of any stockholders or disposal of their stock, corporations are said to have the characteristic of a. limited liability of owners. b. transferable ownership units. c. taxation of corporate earnings. d. unlimited life. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 45. A form issued by the corporation that shows the name of the stockholder and the number of shares owned is called a a. stock certificate. b. proxy. c. charter. d. article of incorporation. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 46. A nominal amount determined by the corporation directors and assigned to no-par stock is called a. book value. b. stated value. c. market value. d. par value. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 47. The price at which a share of capital stock may be purchased or sold at a given time is called its a. market value. b. par value. c. stated value. d. book value. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 48. A journal entry for the sale of $10-par common stock for $18 per share would include a. a debit to Cash. b. a debit to Common Stock. c. a debit to Treasury Stock. d. a debit to Paid-In Capital in Excess of Par - Common Stock. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 49. The journal entry for the receipt of a cash payment on common stock subscriptions would include a. debiting Cash and crediting Common Stock Subscriptions Receivable. b. debiting Cash and crediting Common Stock. c. debiting Common Stock and crediting Common Stock Subscriptions Receivable. d. debiting Common Stock Subscriptions Receivable and crediting Common Stock. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 1 min. 50. Withdrawals in a sole proprietorship or partnership are equivalent to which of the following in a corporation? a. net income b. dividends c. salaries d. retained earnings ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 51. The corporate form of organization offers which of the following disadvantages? a. dissolution upon the death of a stockholder b. attorney's fees c. limited life d. unlimited liability ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 52. Stocks that carry certain specified preferences, or first claims, are called a. common stock. b. treasury stock. c. preferred stock. d. participating stock. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 53. If preferred dividends are limited to the stated dividend rate, the stock is said to be a. participating. b. nonparticipating. c. cumulative. d. noncumulative. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 54. Which of the following are considered to be legal entities that exist separate and distinct from their owners? a. sole proprietorships b. partnerships c. corporations d. organizations with more than 100 partners ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 55. If shares of stock are sold or exchanged for more than par value, the excess is called a. a discount. b. a gain. c. a premium. d. earnings. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 56. A corporation purchases 4,000 shares of its $10 par common stock for $16 per share. The debit part of the journal entry for this transaction would be to a. Cash, $64,000. b. Common Stock, $40,000. c. Common Treasury Stock, $40,000. d. Common Treasury Stock, $64,000. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 57. The ability of any stockholder to transfer stock to another person without the knowledge or the consent of the other stockholders and without disturbing the normal activities of the corporation is called a. unlimited life. b. suitability for large scale operations. c. taxation of corporate earnings. d. transferable ownership units. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 58. Unless specifically denied, each share of capital stock of a business corporation gives its owner the right to a. manage the daily operations of the corporation. b. hire and fire employees. c. set company policy. d. share in the assets if the corporation liquidates. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 59. A corporation's common stock dividends is a. debited to Retained Earnings. b. credited to Retained Earnings. c. debited to Paid-In Capital. d. credited to Paid-In Capital. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 1 min. 60. If there is only one class of stock outstanding, such stock would be classified as a. treasury stock. b. common stock. c. preferred stock. d. outstanding stock. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 61. The major classes of stock are a. common and preferred stock. b. common and treasury stock. c. preferred and treasury stock. d. common and authorized stock. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 62. Preferred stock that is given a right to share with the common stock in dividends in excess of a stated dividend rate is said to be a. participating. b. nonparticipating. c. cumulative. d. noncumulative. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 63. Preferred stock, on which the claims for unpaid dividends may be accumulated from year to year, is called a. participating. b. nonparticipating. c. cumulative. d. noncumulative. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 64. If stock is issued at a price above par value, the transaction that would be recorded is to a. debit Cash, credit Common Stock or Preferred Stock, and credit Paid-In Capital in Excess of Par. b. debit Common Stock or Preferred Stock, debit Paid-In Capital in Excess of Par, and credit Cash. c. debit Cash, debit Common Stock or Preferred Stock, and credit Paid-In Capital in Excess of Par. d. debit Paid-In Capital in Excess of Par, credit Common Stock or Preferred Stock, and credit Cash. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 65. All of the following are characteristics of the stockholders' equity presentation on the balance sheet EXCEPT a. stockholders' equity is separated by source. b. paid-in capital is separated by source. c. preferred stock is listed before common stock. d. retained earnings is listed before all paid-in capital. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.92 - LO: 20-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 66. If shares of preferred stock are sold at par value for cash, the transaction would be entered by a. debiting Cash and crediting Preferred Stock. b. debiting Preferred Stock and crediting Cash. c. debiting Preferred Stock Subscriptions Receivable and crediting Preferred Stock. d. debiting Preferred Stock Subscribed and crediting Preferred Stock. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 67. If shares of stock are sold for less than their par value, the difference is called a. a discount. b. a gain. c. a premium. d. earnings. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 68. A company receives a subscription for 4,000 shares of $1 par value common stock at $10 per share. The journal entry for this transaction would include a debit to a. Common Stock Subscriptions Receivable, $40,000. b. Common Stock Subscribed, $40,000. c. Common Stock, $40,000. d. Premium on Common Stock, $40,000. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 69. A subscription for 4,000 shares of $10 par value common stock was accepted. Upon receipt of the balance owed on the stock subscription, a stock certificate was issued to the subscriber. The journal entry to issue the stock certificate would include a debit to a. Common Stock, $40,000. b. Common Stock, $20,000. c. Common Stock Subscribed, $40,000. d. Common Stock Subscribed, $20,000. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 1 min. 70. Treasury stock is classified as a(n) a. asset. b. contra-asset. c. stockholders' equity account. d. contra-stockholders' equity account. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 71. The total number of shares the corporate charter permits the corporation to issue is called a. outstanding stock. b. authorized stock. c. issued stock. d. common stock. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 72. Based on the following information, prepare journal entries for Windgate Corporation. Mar. 7 16 23 29

Issued 10,000 shares of $5 par common stock for $43,000 cash. Issued 6,000 shares of $5 par common stock for $33,000 cash. Issued 4,000 shares of $12 par, 7% preferred stock for $53,000 cash. Issued 5,000 shares of $4 par common stock for land with a fair market value of $28,000. GENERAL JOURNAL

Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Date Cengage Learning Testing, Powered by Cognero

Description

Page 1 Post Ref.

Debit

Credit Page 29

Chapter 20—Corporations: Organization and Capital Stocks Mar.

7 Cash

Discount on Common Stock Common Stock 16 Cash

43,000.00 7,000.00 50,000.00 33,000.00

Common Stock Paid-In Capital in Excess of Par —Common Stock 23 Cash

30,000.00 3,000.00 53,000.00

Preferred Stock Paid-In Capital in Excess of Par —Preferred Stock 29 Land

Common Stock Paid-In Capital in Excess of Par — Common Stock

48,000.00 5,000.00 28,000.00 20,000.00 8,000.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 10 min.

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Chapter 20—Corporations: Organization and Capital Stocks 73. As of December 31, 20--, the balances of the stockholders' equity accounts of Higbie Auto Inc. were as follows: Common stock, $6 par (30,000 shares authorized, 13,000 shares issued) Paidin capital in excess of par—common stock Common treasury stock (2,000 shares at $6 per share) Preferred stock, 5%, $12 par (16,000 shares authorized, 5,000 shares issued) Paidin capital in excess of par—preferred stock Preferred stock subscribed (2,000 shares) Retained earnings

__________ $17,000 __________ __________ $6,000 __________ $48,000

Required: Based on this information, prepare the stockholders' equity section of the Higbie Auto Inc. balance sheet as of December 31, 20--. ANSWER: Higbie Auto Inc. Balance Sheet (partial) December 31, 20-Paid-in capital: Preferred stock, 5%, $12 par (16,000 shares authorized; 5,000 shares issued) Preferred stock subscribed (2,000 shares) Common stock, $6 par (30,000 shares authorized; 13,000 shares issued) Additional paid-in capital: Paidin capital in excess of par—preferred stock Paidin capital in excess of par—common stock Total paid-in capital Retained earnings Less: Common treasury stock (2,000 shares) Total stockholders' equity POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.92 - LO: 20-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 20 min.

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$60,000 24,000

$ 84,000 78,000

$ 6,000 17,000

23,000 $185,000 48,000 $233,000 12,000 $221,000

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Chapter 20—Corporations: Organization and Capital Stocks 74. The Creative Interiors Corporation has 40,000 shares of $12 par common stock and 12,000 shares of $50 par, 5% preferred stock outstanding. Dividends totaling $156,000 are distributed to common and preferred shareholders combined. Compute the dividends to be distributed to preferred and common stockholders in total and per share under the following independent conditions. (Round to the nearest cent if necessary). a. b. c.

The preferred stock is nonparticipating and noncumulative with no dividends distributed last year. The preferred stock is noncumulative and fully participating after the common shareholders have received dividends per share equal to the preferred stock. The preferred stock is cumulative and nonparticipating and no dividends were distributed last year.

ANSWER:

Preferred stock: $50 par × 5% = $2.50 per share; $2.50 × 12,000 shares = $30,000 Common stock: $156,000 − $30,000 = $126,000; $126,000 ÷ 40,000 shares = $3.15 per share

b. Preferred stock: $2.50 × 12,000 shares = Common stock: $2.50 × 40,000 shares = $156,000 − $130,000 = $26,000; $26,000 ÷ 52,000 total shares = $0.50 additional per share Preferred stock: $3.00 × 12,000 shares = Common stock: $3.00 × 40,000 shares =

c. Preferred stock: $2.50 × 12,000 shares = $2.50 × 12,000 shares =

$ 30,000 100,000 $130,000

$ 36,000 120,000 $156,000 $ 30,000 (prior year) 30,000 (this year) $ 60,000

Common stock: $156,000 − $60,000 = $96,000; $96,000 ÷ 40,000 shares = $2.40 per share POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 15 min. 75. The Vogel and Wallis Corporation is authorized to issue 15,000 shares of 10%, $50 par value preferred stock and 60,000 shares of $5 par value common stock. Following is a narrative of selected transactions completed during the first month after incorporation. June 1 8

The incorporators accepted subscriptions for 5,000 shares of preferred stock at $55 per share. The incorporators accepted subscriptions for 16,000 shares of common stock at $6 per

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Chapter 20—Corporations: Organization and Capital Stocks share. 12 Subscribers of the preferred stock paid $75,000 cash and land valued at $200,000 in full settlement of the subscriptions. 12 Subscribers of the common stock paid $21,000 cash, a $45,000 building, and equipment worth $30,000 in full settlement of the subscriptions. Required: Prepare the journal entries necessary for the transactions. GENERAL JOURNAL Date

Page 1 Post Ref.

Description

Debit

Credit

ANSWER: GENERAL JOURNAL Date June 1

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Description Preferred Stock Subscriptions Receivable Preferred Stock Subscribed Paid-In Capital in Excess of Par —Preferred Stock Common Stock Subscriptions Receivable Common Stock Subscribed Paid-In Capital in Excess of Par

Page 1 Post Ref.

Debit

Credit

275,000.00 250,000.00 25,000.00

96,000.00 80,000.00 Page 33

Chapter 20—Corporations: Organization and Capital Stocks —Common Stock 12

16,000.00

Cash Land Preferred Stock Subscriptions Receivable

75,000.00 200,000.00

Preferred Stock Subscribed Preferred Stock

250,000.00

Cash Building Equipment Common Stock Subscriptions Receivable

21,000.00 45,000.00 30,000.00

Common Stock Subscribed Common Stock

80,000.00

275,000.00

250,000.00

96,000.00

80,000.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.92 - LO: 20-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 25 min. 76. Sanchez and Santos had the following transactions during the past year involving the purchase and sale of treasury stock. July 14 Purchased 4,000 shares of its own $12 par common stock for $15 per share. 17 Sold 2,000 shares of the treasury stock for $17 per share. 29 Sold 2,000 shares of the treasury stock for $13 per share. Required: Prepare the journal entries for the transactions. GENERAL JOURNAL Date

Description

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Page 1 Post Ref.

Debit

Credit

Page 34

Chapter 20—Corporations: Organization and Capital Stocks

ANSWER: GENERAL JOURNAL

Page 1 Post Ref.

Date Description July 14 Common Treasury Stock Cash

Debit 60,000.00

Credit 60,000.00

17 Cash

34,000.00

Common Treasury Stock Paid-In Capital from Sale of Treasury Stock

30,000.00 4,000.00

29 Cash

26,000.00

Paid-In Capital from Sale of Treasury Stock Common Treasury Stock

4,000.00 30,000.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 15 min. 77. After closing its books on December 31, 20--, Hilltop Corporation stockholders' equity accounts have the following balances. Complete the stockholders' equity section of the balance sheet. Paidin capital in excess of par—preferred stock Paidin capital in excess of par—common stock Paid-in capital from sale of treasury stock Retained earnings

$ 45,000 19,000 32,000 111,000

Hilltop Corporation Stockholders' Equity December 31, 20-Paid-in capital: Preferred stock, 6%, $14 par (15,000 shares issued and outstanding) Preferred stock subscribed (6,000 shares) Common stock, $10 par (70,000 shares issued and 44,000 shares outstanding) Common stock subscribed (20,000 shares) Additional paid-in capital: Cengage Learning Testing, Powered by Cognero

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Chapter 20—Corporations: Organization and Capital Stocks Paid-in capital in excess of par—preferred stock Paid-in capital in excess of par—common stock Paid-in capital from sale of treasury stock Total paid-in capital Retained earnings Less: Treasury stock (5,000 shares; $14 cost per share) Total stockholders' equity ANSWER: Hilltop Corporation Stockholders' Equity December 31, 20-Paid-in capital: Preferred stock, 6%, $14 par (15,000 shares issued and outstanding) Preferred stock subscribed (6,000 shares) Common stock, $10 par (70,000 shares issued and 44,000 shares outstanding) Common stock subscribed (20,000 shares) Additional paid-in capital: Paidin capital in excess of par—preferred stock Paidin capital in excess of par—common stock Paid-in capital from sale of treasury stock Total paid-in capital Retained earnings Less: Treasury stock (5,000 shares; $14 cost per share) Total stockholders' equity

$210,000 84,000 $ 294,000 $440,000 200,000 $ 45,000 19,000 32,000

640,000

96,000 $1,030,000 111,000 $1,141,000 70,000 $1,071,000

POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.92 - LO: 20-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 25 min.

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Chapter 20—Corporations: Organization and Capital Stocks 78. Prepare the appropriate general journal entries for the following treasury stock transactions of Aberdeen Inc. Oct. 15

Purchased 7,000 shares of its $15 par common stock for $70,000 and placed the stock in the treasury. Dec. 1 Sold 2,000 shares of the treasury stock for $18,000 cash. Dec. 31 Sold the remaining treasury stock for $56,000 cash. GENERAL JOURNAL Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Description Date Oct. 15 Common Treasury Stock Cash Dec.

Page 1 Post Ref.

Debit 70,000.00

Credit 70,000.00

1 Cash Retained Earnings Common Treasury Stock

18,000.00 2,000.00

31 Cash Paid-In Capital from Sale of Treasury Stock Treasury Stock

56,000.00

20,000.00

6,000.00 50,000.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 15 min. 79. Based on the following information from Castle Keys Corporation, prepare the appropriate journal entries. Cengage Learning Testing, Powered by Cognero

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Chapter 20—Corporations: Organization and Capital Stocks Apr. 10 12 25 30 May 15

Incurred organization costs totaling $4,200. Issued 9,000 shares of $10 par common stock for $110,000. Issued 3,500 shares of 7%, $30 par preferred stock for $115,000. Issued 6,000 shares of $10 par common stock for $65,000. Issued 3,000 shares of 7%, $30 par preferred stock for equipment with a fair market value of $93,000. GENERAL JOURNAL

Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Description Date Apr. 10 Organization Expenses Cash

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Page 1 Post Ref.

Debit 4,200.00

Credit 4,200.00

12 Cash Common Stock Paid-In Capital in Excess of Par — Common Stock

110,000.00

25 Cash Preferred Stock Paid-In Capital in Excess of Par— Preferred Stock

115,000.00

30 Cash Common Stock

65,000.00

90,000.00 20,000.00

105,000.00 10,000.00

60,000.00 Page 38

Chapter 20—Corporations: Organization and Capital Stocks Paid-In Capital in Excess of Par —Common Stock May

15 Equipment Preferred Stock Paid-In Capital in Excess of Par —Preferred Stock

5,000.00 93,000.00 90,000.00 3,000.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 15 min. 80. The Delta Sunrise Corporation is incorporated under the laws of Mississippi. The certificate of incorporation shows that the company is authorized to issue 75,000 shares of 10%, $40 par preferred stock and 125,000 shares of $10 par common stock. Following is a narrative of selected transactions completed during the first month after incorporation. Prepare the appropriate journal entries. Aug. 1 4 12 26

At the first meeting of the incorporators, subscriptions for 30,000 shares of common stock at $12 per share were accepted. Received a payment of $150,000 on the common stock subscription. Issued 6,000 shares of preferred stock in exchange for $100,000 cash and land with a fair market value of $160,000. Received the balance in full for the common stock subscription and issued the stock certificates. GENERAL JOURNAL

Date

Description

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Page 1 Post Ref.

Debit

Credit

Page 39

Chapter 20—Corporations: Organization and Capital Stocks

ANSWER: GENERAL JOURNAL Date Aug.

Description Common Stock Subscriptions 1 Receivable Common Stock Subscribed Paid-In Capital in Excess of Par— Common Stock

Page 1 Post Ref.

Debit

Credit

360,000.00 300,000.00 60,000.00

4 Cash Common Stock Subscriptions Receivable

150,000.00

12 Cash Land Preferred Stock Paid-In Capital in Excess of Par —Preferred Stock

100,000.00 160,000.00

26 Cash Common Stock Subscriptions Receivable

210,000.00

26 Common Stock Subscribed Common Stock

300,000.00

150,000.00

240,000.00 20,000.00

210,000.00

300,000.00

POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 20 min.

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Chapter 20—Corporations: Organization and Capital Stocks 81. The Ramos Corporation has 50,000 shares of $5 par common stock and 10,000 shares of $25 par, 5% preferred stock outstanding. Dividends totaling $150,000 are distributed to common and preferred shareholders combined. Compute the dividends to be distributed to preferred and common stockholders in total and per share under the following independent conditions. (Round to the nearest cent if necessary) a. b. c.

The preferred stock is nonparticipating and noncumulative with no dividends distributed last year. The preferred stock is noncumulative and fully participating after the common stockholders have received dividends per share equal to the preferred stock. The preferred stock is cumulative and nonparticipating and no dividends were distributed last year.

ANSWER:

a. Preferred stock: $25 par × 5% = $1.25 per share; $1.25 × 10,000 shares = $12,500 Common stock: $150,000 − $12,500 = $137,500; $137,500 ÷ 50,000 shares = $2.75 per share b. Preferred stock: $1.25 × 10,000 shares = Common stock: $1.25 × 50,000 shares =

$ 12,500 62,500 $ 75,000

$150,000 − $75,000 = $75,000; $75,000 ÷ 60,000 total shares = $1.25 additional per share Preferred stock: $2.50 × 10,000 shares = $ 25,000 Common stock: $2.50 × 50,000 shares = 125,000 $150,000 c. Preferred stock: $1.25 × 10,000 shares = $1.25 × 10,000 shares =

$ 12,500 (prior year) 12,500 (this year) $ 25,000

Common stock: $150,000 − $25,000 = $125,000; $125,000 ÷ 50,000 shares = $2.50 per share POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 20 min.

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Chapter 20—Corporations: Organization and Capital Stocks 82. ____________________ represents ownership rights in a corporation and is generally broken down into common and preferred stock. ANSWER: Capital stock POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 83. Capital stock that has been sold and disbursed is known as ____________________. ANSWER: issued stock POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 84. ____________________ preferred stock accrues unpaid dividends from year to year. ANSWER: Cumulative POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 85. A corporation can obtain capital by selling ____________________. ANSWER: shares of stocks POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 86. Preferred stock on which dividends are limited to the stated dividend rate is known as ____________________. ANSWER: nonparticipating POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 87. The ____________________ determines corporate policies and selects the corporate officers. ANSWER: board of directors POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 88. ____________________ is the dollar amount printed on the share of stock. ANSWER: Par value POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 89. The process of taxing corporate income both to the company that earns it and the owners who receive it is called ____________________. ANSWER: double taxation POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 90. The ____________________ is the legal document which includes the name of the corporation, the location of the principal office, the purpose of the business, the description of the capital stock, and the names and addresses of the incorporators. ANSWER: charter POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 91. The number of shares in the hands of stockholders is the ____________________. ANSWER: outstanding stock POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 92. The ____________________ is an agreement in which a buyer contracts to buy shares of a corporation at a specific price. ANSWER: capital stock subscription POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 93. The costs of organizing a corporation, such as incorporation fees, attorneys' fees, and promotion expenses are called ____________________. ANSWER: organization costs POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 94. Capital stock is divided into ____________________ that represent ownership rights in the corporation. ANSWER: shares POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 95. The ____________________ is the total number of shares the corporation's charter allows a corporation to issue. ANSWER: authorized stock POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 96. Dividends on ____________________ preferred stock do not accrue from one year to another. ANSWER: noncumulative POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 97. The ____________________ is the option to purchase additional shares in proportion to the owner's present holding, if more shares are issued by the corporation. ANSWER: preemptive right POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 98. In a corporation, owners' equity is called ____________________. ANSWER: stockholders' equity POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 99. Shares of ____________________ are shares that have been bought back by the issuing company. ANSWER: treasury stock POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 100. The difference between the par value and the price of a stock when the stock is issued at a price above par is known as a(n) ____________________. ANSWER: premium POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 101. ____________________ are distributions of corporate income to the owners. ANSWER: Dividends POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 102. ____________________ represents the accumulated earnings of the corporation that have not been paid out to the stockholders as dividends. ANSWER: Retained earnings POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 48

Chapter 20—Corporations: Organization and Capital Stocks 103. The amount for which the stock can be sold on the open market is known as the ____________________. ANSWER: market value POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 104. ____________________ preferred stock gives its owners the right to share with common stock owners in dividends in excess of a stated dividend rate. ANSWER: Participating POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 105. The ____________________ are those who form a corporation by filing an application with the state in which the company is to be incorporated. ANSWER: incorporators POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 106. ____________________ is the amount paid by stockholders for their shares of stock. ANSWER: Paid-in capital POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 107. ____________________ gives the owner the right to vote at stockholders' meetings, share in earnings distributions, purchase additional shares if more shares are issued by the corporation, and share in the assets if the corporation liquidates. ANSWER: Common stock POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 108. The corporate ____________________, together with the charter, provide the general guidelines for conducting the business. ANSWER: bylaws POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.89 - LO: 20-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 20—Corporations: Organization and Capital Stocks 109. The ____________________ is the value per share assigned to no-par stock by the board of directors. ANSWER: stated value POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 110. ____________________ on Preferred Stock is reported as a deduction from paid-in capital on the balance sheet. ANSWER: Discount POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. authorized stock b. board of directors c. bylaws d. premium e. capital stock subscription f. preferred stock g. paid-in capital h. cumulative preferred stock i. dividends j. double taxation k. outstanding stock l. no-par stock DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.89 - LO: 20-1 COLL.HEIN.17.90 - LO: 20-2 COLL.HEIN.17.91 - LO: 20-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations Cengage Learning Testing, Powered by Cognero

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Chapter 20—Corporations: Organization and Capital Stocks KEYWORDS: Bloom's: Remembering NOTES: 1 min. 111. The number of shares in the hands of stockholders. ANSWER: k POINTS: 1 112. Together with the charter, this provides the general guidelines for conducting the business. ANSWER: c POINTS: 1 113. The distributions of corporate income to the owners. ANSWER: i POINTS: 1 114. The difference between the par value and the price of a stock when the stock is issued at a price above par. ANSWER: d POINTS: 1 115. The total number of shares that the corporate charter authorizes a corporation to issue. ANSWER: a POINTS: 1 116. The amount paid by stockholders for their shares of stock. ANSWER: g POINTS: 1 117. Preferred stock on which unpaid dividends accumulate from year to year. ANSWER: h POINTS: 1 118. Stock that has certain preferences or rights superior to common stock. ANSWER: f POINTS: 1 119. An agreement in which a buyer contracts to buy shares of a corporation at a specific price. ANSWER: e POINTS: 1 120. The process of taxing corporate income both to the company that earns it and to the owners who receive it. ANSWER: j POINTS: 1 121. group elected by the stockholders to determine corporate policies and to select corporate officers. ANSWER: b POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Chapter 20—Corporations: Organization and Capital Stocks Match the terms with the definitions. a. preemptive right b. participating preferred stock c. par value d. capital stock e. organization costs f. charter g. common stock h. nonparticipating preferred stock i. noncumulative preferred stock j. no-par stock k. incorporators l. issued stock m. market value n. mutual agency DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.89 - LO: 20-1 COLL.HEIN.17.90 - LO: 20-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 122. Preferred stock on which the dividends are limited to the stated dividend rate. ANSWER: h POINTS: 1 123. Stock that gives its owner the right to vote at stockholders' meeting, share in earnings distributions, purchase additional shares if more shares are issued by the corporation, and share in the assets if the corporation liquidates. ANSWER: g POINTS: 1 124. The dollar amount printed on the share of stock. ANSWER: c POINTS: 1 125. Preferred stock on which dividend claims do not accrue from year to year. ANSWER: i POINTS: 1

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Chapter 20—Corporations: Organization and Capital Stocks 126. Preferred stock that has a right to share with common stock in dividends in excess of a stated dividend rate. ANSWER: b POINTS: 1 127. Capital stock that has been sold and disbursed. ANSWER: l POINTS: 1 128. The power of each owner to act as an agent and engage in contracts for a business. ANSWER: n POINTS: 1 129. The right to purchase additional shares in proportion to the owner's present holding, if more shares are issued by the corporation. ANSWER: a POINTS: 1 130. Represents ownership rights in a corporation. Generally broken down into common and preferred stock. ANSWER: d POINTS: 1 131. Those who form a corporation by filing an application with the state in which the company is to be incorporated. ANSWER: k POINTS: 1 132. Legal document which includes the name of the corporation, the location of the principal office, the purpose of the business, the description of the capital stock, and the names and addresses of the incorporators. ANSWER: f POINTS: 1 133. The costs of organizing a corporation, such as incorporation fees, attorneys' fees, and promotion expenses. ANSWER: e POINTS: 1 134. The amount for which the stock can be sold on the open market. ANSWER: m POINTS: 1

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 1. Corporations are subject to specific corporate tax rates different from those for individuals. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. Income taxes for a corporation are normally reported as a separate expense item on the income statement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.99 - LO: 21-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. The balance of the income summary account of a corporation is transferred to the capital stock account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.99 - LO: 21-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 4. The two major sources of capital for every type of business are capital that results from the investment of cash or other property by the owner or owners and capital that results from the receipt of dividends. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.99 - LO: 21-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. A corporation generally keeps and reinvests a portion of its net income instead of distributing it to its stockholders. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.99 - LO: 21-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. In corporate accounting, a distinction is made between paid-in or invested capital and capital resulting from retained earnings. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.99 - LO: 21-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 7. An entry is required both on the date of declaration and the date of payment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. Corporate earnings that are not distributed to the stockholders are retained by the corporation to help finance the growth of the business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.99 - LO: 21-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. When a dividend is declared, Stock Dividends is debited and Cash is credited. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 10. Cash dividends reduce both the retained earnings and the stockholders' equity in the corporation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. One thing that the sole proprietorship and the corporate form of organization have in common is that neither must pay income taxes. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.99 - LO: 21-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. A board of directors may declare a dividend higher than the balance of the retained earnings account, as long as the cash balance is adequate to pay the dividends. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 13. At year-end, an adjusting entry is necessary to recognize the correct amount of income taxes the corporation must pay for the year. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.99 - LO: 21-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. Most corporations must estimate their annual income taxes and make quarterly tax payments. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.99 - LO: 21-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. No dividend can be paid unless so declared by the board of directors. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 16. Upon the date of declaration of a dividend, the corporation has incurred a liability for the dividend. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. If a 10% stock dividend is declared, an amount equal to the par value of the shares to be distributed should be charged to the retained earnings account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. The names of stockholders entitled to receive dividends are determined on the date of payment. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 19. Dividends on different classes of capital stock should be accounted for separately. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. A credit balance in Income Summary represents net loss; a debit balance represents a net income. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. A proportionate distribution of shares of a corporation's own stock to its stockholders is called a property dividend. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 22. A stock dividend may be distributed even if the company is short of cash. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. When an appropriation of retained earnings is made, total retained earnings is decreased. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.100 - LO: 21-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. Corporations can legally declare cash dividends only if the retained earnings balance is sufficient to cover the dividends. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.100 - LO: 21-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 25. A stock dividend will reduce the amount in the retained earnings section of stockholders' equity, while increasing the amount in the paid-in capital section. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. Unappropriated Retained Earnings will decrease because of net losses, declarations of cash or stock dividends, and appropriations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.100 - LO: 21-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. A statement of retained earnings is used to explain the change in the amount of retained earnings between two successive balance sheet dates. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.101 - LO: 21-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 28. For a stock dividend of less than 20 to 25% of the outstanding shares, Stock Dividends is debited for the par value of the stock to be distributed. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. Three dates are involved in the declaration and payment of dividends-the date of declaration, the date of record, and the date of payment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. An exchange of one share of an old issue of stock for a multiple number of shares of a new issue of stock with a reduced par or stated value is known as a stock split. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 31. Stock Dividends Distributable is reported as an addition to common stock in the stockholders' equity section of the balance sheet. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.100 - LO: 21-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. Generally, a stock dividend is declared to improve the marketability of the shares by reducing the market price per share, increasing the number of shares outstanding, and making it possible to have a wider ownership of the stock. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. Appropriation of retained earnings has been used primarily to limit the availability of retained earnings for paying stockholders' dividends. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.100 - LO: 21-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 34. Even if there are both appropriated and unappropriated retained earnings, the balances are combined when preparing the statement of retained earnings. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.101 - LO: 21-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. Stock dividends typically are stated as a percentage of common stock outstanding. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. A stock split requires no formal journal entry and may be recognized simply by a memorandum notation in the general journal and in the appropriate capital stock accounts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.100 - LO: 21-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 37. The ending balance of the retained earnings account on the statement of retained earnings is the same amount that appears in the stockholders' equity section of the balance sheet. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.101 - LO: 21-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. An adjusting entry is not required if the estimated payments made throughout the year are more than the actual taxes due. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.99 - LO: 21-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 39. If the corporation has a net loss for the period, the closing entry will include a debit to Income Summary and a credit to Retained Earnings. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.99 - LO: 21-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 40. If a balance sheet is prepared between the date of declaration and date of payment, dividends payable accounts are reported as current liabilities. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.100 - LO: 21-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 41. If a corporation issues additional shares of its own stock to the stockholders on a proportional ownership basis, these are known as a a. liquidating dividend. b. dividend payable. c. cash dividend. d. stock dividend. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 42. Most corporations must estimate their annual income taxes and make a. annual payments. b. semiannual payments. c. monthly payments. d. quarterly payments. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.99 - LO: 21-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 43. Estimated quarterly income tax payments are due on each of the following dates EXCEPT a. March 15. b. April 15. c. June 15. d. September 15. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.99 - LO: 21-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 44. After making four quarterly estimated payments of $3,500, a corporation's actual income tax liability for the year is $17,200. The year-end adjusting entry would require a. a debit to Income Tax Payable for $3,200. b. a debit to Cash for $3,200. c. a credit to Cash for $3,200. d. a debit to Income Tax Expense for $3,200. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 1 min. 45. When a dividend is paid in cash, it is known as a a. liquidating dividend. b. dividend payable. c. cash dividend. d. property dividend. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 46. Capital resulting from the retention of earnings should be entered in an account with an appropriate title such as a. Retained Earnings. b. Appropriated Retained Earnings. c. Earnings Retained in the Business. d. Capital Stock. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.99 - LO: 21-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 47. All of the following statements concerning Retained Earnings are true EXCEPT a. declaring cash dividends will decrease Retained Earnings. b. distributing stock dividends will decrease Retained Earnings. c. appropriating retained earnings will have no effect on total stockholders' equity. d. declaring a stock split will have no effect on Retained Earnings. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.101 - LO: 21-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 48. The balance of the income summary account of a corporation is transferred to which of the following accounts? a. Capital Stock b. Cash c. Premium on Sale of Capital Stock d. Retained Earnings ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.99 - LO: 21-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 49. Typically, the only credit to the retained earnings account for a corporation is a. the initial investment of all owners. b. net income of the period. c. net loss of the period. d. any withdrawal by the owners. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.99 - LO: 21-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 50. A dividend is declared by the a. board of directors. b. stockholders. c. president of the corporation. d. CFO of the corporation. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 51. The board of directors declared a $2 per share cash dividend on common stock and the corporation had 5,000 shares authorized and 4,000 shares outstanding and make a journal entry. The journal entry for the dividend payment would be a. a debit to Cash Dividends for $8,000 and a credit to Common Dividends Payable for $8,000. b. a debit to Cash Dividends for $10,000 and a credit to Common Dividends Payable for $10,000. c. a debit to Cash Dividends Payable for $8,000 and a credit to Cash for $8,000. d. a debit to Cash Dividends Payable for $10,000 and a credit to Cash for $10,000. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 52. An entry to appropriate a portion of retained earnings to finance a future plant expansion would include a credit to a. Unappropriated Retained Earnings. b. Appropriated Retained Earnings. c. Cash. d. Paid-In Capital in Excess of Par. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.100 - LO: 21-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 53. A retained earnings appropriation is a restriction of retained earnings by a. the board of directors. b. stockholders. c. senior management. d. accountants. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.101 - LO: 21-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 54. The board of directors declared a $2 per share cash dividend on common stock and the corporation had 5,000 shares authorized and 4,000 shares outstanding. The entry required to record the declaration of dividends would be a. a debit to Cash and a credit to Common Dividends Payable. b. a debit to Common Dividends Payable and a credit to Cash. c. a debit to Retained Earnings and a credit to Common Dividends Payable. d. a debit to Cash Dividends and a credit to Common Dividends Payable. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 1 min. 55. The journal entry made on the date of declaration of a cash dividend to common stockholders includes a. a debit to Cash Dividends and a credit to Common Dividends Payable. b. a debit to Cash Dividends and a credit to Cash. c. a debit to Common Dividends Payable and a credit to Cash Dividends. d. a debit to Cash and a credit to Common Dividends Payable. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 56. A corporation may issue a stock dividend for which of the following reasons? a. It may be short of cash and unable to pay a cash dividend. b. It may want to increase the marketability of its stock by raising the price per share. c. It may have a large debit balance in Retained Earnings and the directors may want to transfer part of this balance to the common stock account. d. It may want to increase the stockholders' ownership in the corporation. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 57. In a corporation, the capital resulting from the retention of earnings is entered in the a. cash account. b. retained earnings account. c. paid-in capital account. d. income summary account. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 58. Which of the following would not be shown on the statement of retained earnings? a. declaration of a cash dividend b. declaration of a stock dividend c. an appropriation for plant expansion d. the purchase of treasury stock ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.101 - LO: 21-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 59. The owner of 100 shares of stock of a corporation with 2,000 shares of stock outstanding has a 5% interest in the total stockholders' equity. If a 20% stock dividend is declared and distributed, that stockholder would own which of the following number of shares? a. 20 b. 100 c. 105 d. 120 ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 60. An exchange of one share of an old issue of stock for a multiple number of shares of a new issue of stock with reduced par or stated value is known as a a. property dividend. b. stock dividend. c. stock split. d. liquidating dividend. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 61. When a stock dividend of less than 20−25% is declared and the market value exceeds the par or stated value of the shares, an amount equal to the market value of the shares to be distributed should be charged (debited) to which of the following accounts? a. Stock Dividends b. Stock Dividends Distributable c. Paid-In Capital in Excess of Par d. Capital Stock ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 62. When a stock dividend is distributed, the account to be debited would be a. Retained Earnings. b. Stock Dividends Distributable. c. Paid-In Capital in Excess of Par. d. Capital Stock. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 63. When a small stock dividend is declared and the market value exceeds the par or stated value of the shares, the excess of market value over par or stated value should be entered in which of the following accounts? a. Stock Dividends. b. Stock Dividends Distributable. c. Paid-In Capital in Excess of Par. d. Capital Stock. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 64. When a stock dividend is distributed, the account to be credited would be a. Stock Dividends. b. Stock Dividends Distributable. c. Paid-In Capital in Excess of Par. d. Capital Stock. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 65. A resolution by the board of directors to set aside a part of the credit balance of the retained earnings account for a specific use is called a. earnings retained in the business. b. an appropriation. c. a recapitalization. d. a deficit. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.100 - LO: 21-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 66. The purpose of a retained earnings appropriation is to inform readers of the balance sheet that a. the appropriated amount is unavailable for dividends. b. such an appropriation is required to pay corporate income taxes. c. an appropriation is needed because the corporation expects a net loss for the year. d. an appropriation is needed because the corporation is involved in a lawsuit. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.100 - LO: 21-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 67. The owner of 100 shares of stock of a corporation with 2,000 shares of stock outstanding has a 5% interest in the total stockholders' equity. If a 20% stock dividend is declared and distributed a 5% interest in the total stockholders' equity prior to the stock dividend, would have which of the following interests in the equity after the stock dividend was distributed? a. 5% b. 6% c. 20% d. 25% ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 68. The effect of a retained earnings appropriation is to a. divide the retained earnings into two categories. b. increase cash and other assets. c. allow the corporation to use its assets for dividends. d. increase the number of shares of stock available. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.100 - LO: 21-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 69. To explain the change in the amount of retained earnings between successive balance sheet dates, it is customary to prepare a(n) a. retained earnings statement. b. balance sheet. c. statement of stockholders' equity. d. income statement. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.101 - LO: 21-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 70. The appropriated retained earnings can be returned to the unappropriated retained earnings account a. at year end. b. the first day of the new year (reversing entry). c. when the directors decide to restrict its use. d. when the appropriation has served its purpose. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.100 - LO: 21-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 71. All of the following statements concerning appropriation of retained earnings are true EXCEPT a. the practice of appropriating retained earnings is unusual today. b. stockholders generally expect all unappropriated retained earnings to be distributed in the form of dividends. c. it is necessary to advise balance sheet readers that retained earnings is not totally available for dividends. d. simply noting the restriction of retained earnings is not sufficient. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.101 - LO: 21-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 72. Prepare journal entries for each of the following transactions of Telecommunications, Inc. Apr. 15 May 19

Declared a dividend of $1.43 per share on 11,000 shares of preferred stock outstanding. Paid the dividend declared on April 15. GENERAL JOURNAL

Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Description Date Apr. 15 Cash Dividends Preferred Dividends Payable May

19 Preferred Dividends Payable Cash

Page 1 Post Ref.

Debit 15,730.00

Credit 15,730.00

15,730.00 15,730.00

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 73. On January 1, Martinez Corporation's retained earnings accounts had the following balances: Appropriation for debt retirement Unappropriated retained earnings

$ 53,000 900,000 $953,000

A summary of the year's activities is given below: Cash dividends declared and paid on preferred stock Cash dividends declared and paid on common stock Additional appropriation for debt retirement Net income for the year

$ 25,000 120,000 53,000 310,000

Required: Prepare the retained earnings statement for the year ended December 31, 20--. ANSWER: Martinez Corporation Retained Earnings Statement For the Year Ended December 31, 20-Appropriated: Appropriated for debt retirement, Jan. 1 Current year appropriation Retained earnings appropriated, Dec. 31 Unappropriated: Balance, Jan. 1 Add net income for the year Less: Cash dividends, preferred stock Cash dividends, common stock Transfer to appropriated for debt retirement Retained earnings unappropriated, Dec. 31 Total retained earnings, Dec. 31 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.101 - LO: 21-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 10 min.

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$ 53,000 53,000 $ 106,000

$900,000 310,000 $1,210,000 $ 25,000 120,000 53,000 198,000 1,012,000 $1,118,000

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 74. Prepare journal entries for each of the following transactions. June 25

July 1

Declared a 7% stock dividend to common shareholders. The market value of the common stock is $14 per share. The par value is $13. There are 60,000 shares of common stock outstanding. Issued stock dividend in settlement of dividend declared on June 25.

Date

GENERAL JOURNAL Post Description Ref.

Page 1 Debit

Credit

ANSWER: GENERAL JOURNAL Description Date June 25 Stock Dividends Stock Dividends Distributable Paid-In Capital in Excess of Par— Common Stock July

1 Stock Dividends Distributable Common Stock

Page 1 Post Ref.

Debit 58,800.00

Credit 54,600.00 4,200.00

54,600.00 54,600.00

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 75. Prepare the journal entry for the following transaction. Apr. 15

Last year, Titan Corporation's board of directors appropriated $150,000 for the purchase of a new storage facility over a three-year period. This year's appropriation for $50,000 was made on this date. GENERAL JOURNAL

Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Description Date Apr. 15 Retained Earnings Retained Earnings Appropriated for Storage Facility

Page 1 Post Ref.

Debit 50,000.00

Credit

50,000.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.100 - LO: 21-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 2 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 76. Santiago Corporation estimated at the beginning of 20-- that its income tax for the year would be $200,000. Calculate the estimated income tax per quarter and show one of the quarterly entries to pay the taxes. GENERAL JOURNAL Date

Description

Page 1 Post Ref.

Debit

Credit

As of December 31, 20-- Santiago Corporation had an actual tax liability of $200,437. Calculate the income tax due and make the necessary adjusting entry.

Date

GENERAL JOURNAL Post Description Ref.

Page 1 Debit

Credit

ANSWER: GENERAL JOURNAL Description Date Sept. 15 Income Tax Expense Cash ($200,000 ÷ 4)

Page 1 Post Ref.

Debit 50,000.00

50,000.00

GENERAL JOURNAL Description Date Dec. 31 Income Tax Expense Income Tax Payable ($200,437 − $200,000)

Credit

Page 1 Post Ref.

Debit 437.00

Credit 437.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.99 - LO: 21-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 3 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 77. Pippin Company has 70,000 shares of $14 par common stock outstanding. On July 1, the board of directors declared a two-for-one stock split. Prepare the memorandum entry in the general journal indicating the new par value and the total number of outstanding shares of common stock. GENERAL JOURNAL Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Date July 1

Description Declared a two-for-one stock split. Issued 140,000 shares of $7 par common stock in exchange for 70,000 shares of $14 par common stock.

Page 1 Post Ref.

Debit

Credit

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 78. Light Touch, Inc. has 110,000 shares of $8 par common stock outstanding. On July 1, the board of directors declared a two-for-one stock split. Prepare the memorandum entry in the general journal indicating the new par value and the total number of outstanding shares of common stock. GENERAL JOURNAL Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Description Date July 1 Declared a two-for-one stock split. Issued 220,000 shares of $4 par common stock in exchange for 110,000 shares of $8 par common stock.

Page 1 Post Ref.

Debit

Credit

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 79. Record the following transaction for Godiva Corporation. Sept. 1Last year, Godiva's board of directors appropriated $840,000 for the purchase of a new branch office, over a three-year period. This year's appropriation for $280,000 was made on this date.

Date

GENERAL JOURNAL Post Description Ref.

Page 1 Debit

Credit

ANSWER: GENERAL JOURNAL Description Date Sept. 1 Retained Earnings Retained Earnings Appropriated for Branch Office

Page 1 Post Ref.

Debit 280,000.00

Credit

280,000.00

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 80. Matrix Corporation estimated at the beginning of 20-- that its income tax for the year would be $140,000. Calculate the estimated income tax payment per quarter and show one of the quarterly entries to pay the taxes. GENERAL JOURNAL Date

Description

Page 1 Post Ref.

Debit

Credit

As of December 31, 20--, Matrix Corporation had an actual tax liability of $143,200. Calculate the income tax due and make the necessary adjusting entry. GENERAL JOURNAL Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Description Date Apr. 15 Income Tax Expense Cash ($140,000 ÷ 4)

Page 1 Post Ref.

Debit 35,000.00

35,000.00

GENERAL JOURNAL Description Date Dec. 31 Income Tax Expense Income Tax Payable ($143,200 − $140,000)

Credit

Page 1 Post Ref.

Debit 3,200.00

Credit 3,200.00

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 81. Prepare appropriate general journal entries for each of the following transactions for Litefoot, Inc. Oct. 1 20

Declared a dividend of $1.53 per share on 6,000 shares of preferred stock outstanding. Paid the dividend on preferred stock declared on October 1. GENERAL JOURNAL

Date

Page 1 Post Ref.

Description

Debit

Credit

ANSWER: GENERAL JOURNAL Description Date Oct. 1 Cash Dividends Preferred Dividends Payable 20 Preferred Dividends Payable

Cash

Page 1 Post Ref.

Debit 9,180.00

Credit 9,180.00

9,180.00 9,180.00

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 82. Prepare appropriate general journal entries for each of the following transactions for Mainstream Technologies, Inc. Mar. 25

Apr. 1 July 31

Declared a 10% stock dividend to common shareholders. The market value of the common stock is $12 per share. The par value is $10. There are 100,000 shares of common stock currently outstanding. Issued the stock certificates for the stock dividend. Declared a two-for-one stock split. GENERAL JOURNAL

Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Description Date Mar. 25 Stock Dividends Stock Dividends Distributable Paid-In Capital in Excess of Par— Common Stock Apr.

July

1 Stock Dividends Distributable Common Stock

Page 1 Post Ref.

Debit 120,000.00

Credit 100,000.00 20,000.00

100,000.00 100,000.00

31 Declared a two-for-one stock split. Issued 220,000 shares of $5 par common stock in exchange for 110,000 shares of $10 par common stock.

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 5 min. 83. On January 1, 20--, Sargento Corporation's retained earnings accounts had the following balances: Cengage Learning Testing, Powered by Cognero

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement Appropriated for plant purchase Retained earnings (unappropriated)

$150,000 600,000 $750,000

Cash dividends declared and paid on preferred stock Cash dividends declared and paid on common stock Common stock dividend declared and distributed Additional appropriation for plant purchase Net income for the year

$ 30,000 60,000 20,000 60,000 317,000

Required: Complete the retained earnings statement for the year ended December 31, 20--. Sargento Corporation Retained Earnings Statement For the Year Ended December 31, 20-Appropriated: Appropriated balance, Jan. 1 Current year appropriation Total appropriated retained earnings, Dec. 31 Unappropriated: Unappropriated balance, Jan. 1 Net income for the year Cash dividends paid—preferred Cash dividends paid—common Stock dividends distributed—common Appropriation for plant equipment Total unappropriated retained earnings, Dec. 31 Total retained earnings, Dec. 31 ANSWER: Sargento Corporation Retained Earnings Statement For the Year Ended December 31, 20--

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Appropriated: Appropriated balance, Jan. 1 Current year appropriation Total appropriated retained earnings, Dec. 31 Unappropriated: Unappropriated balance, Jan. 1 Net income for the year Cash dividends paid—preferred Cash dividends paid—common Stock dividends distributed—common Appropriation for plant equipment Total unappropriated retained earnings, Dec. 31 Total retained earnings, Dec. 31 1 Moderate

$150,000 60,000 $210,000 $600,000 317,000$917,000 $ 30,000 60,000 20,000 60,000 170,000 747,000 $957,000

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement LEARNING OBJECTIVES: COLL.HEIN.17.101 - LO: 21-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Applying NOTES: 10 min. 84. An exchange of one share of an old issue of stock for multiple shares of a new issue with a reduced par or stated value is called a(n) ____________________. ANSWER: stock split POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 85. The ____________________ is the date on which the board of directors declares that a dividend is to be paid. ANSWER: date of declaration POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 86. In a corporation, capital resulting from the retention of earnings is entered in the ____________________ account. ANSWER: retained earnings POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 87. A proportionate distribution of shares of a corporation's own stock to its stockholders is known as a(n) ____________________. ANSWER: stock dividend POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 88. A restriction of retained earnings by the board of directors for a specific purpose is called a(n) ____________________. ANSWER: retained earnings appropriation POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.100 - LO: 21-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 89. The ____________________ is when the names of stockholders entitled to receive the dividend are determined. ANSWER: date of record POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 90. Earnings retained in a corporation are recorded by closing the income summary account to the ____________________ account at the end of the period. ANSWER: retained earnings POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.101 - LO: 21-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. 91. The ____________________ is the date on which the dividend is actually paid by the corporation. ANSWER: date of payment POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. cash dividend b. date of declaration c. date of payment d. date of record e. dividend f. retained earnings appropriation g. retained earnings statement h. stock dividend i. stock split DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.100 - LO: 21-3 COLL.HEIN.17.101 - LO: 21-4 COLL.HEIN.17.98 - LO: 21-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-20-Accounting for Corporations KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 21—Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement 92. The date on which the board of directors declares that a dividend is to be paid. ANSWER: b POINTS: 1 93. A proportionate distribution of shares of a corporation's own stock to its stockholders. ANSWER: h POINTS: 1 94. A distribution of earnings by a corporation to its stockholders. ANSWER: e POINTS: 1 95. A restriction of retained earnings by the board of directors for a specific purpose. ANSWER: f POINTS: 1 96. The date on which the dividend is actually paid by the corporation. ANSWER: c POINTS: 1 97. An exchange of one share of an old issue of stock for multiple shares of a new issue with a reduced par or stated value. ANSWER: i POINTS: 1 98. A statement that explains the change in the amount of retained earnings during the year. ANSWER: g POINTS: 1 99. The date on which the names of stockholders entitled to receive the dividend are determined. ANSWER: d POINTS: 1 100. A dividend payable in cash. ANSWER: a POINTS: 1

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Chapter 22—Corporations: Bonds 1. A bond is an obligation of the shareholders. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. Bondholders are the owners of the corporation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. Gain on Redemption is reported as a component of other income on the corporation's income statement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.103 - LO: 22-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 4. Bonds Sinking Fund is reported as a liability on the corporation's balance sheet. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.103 - LO: 22-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. While bonds and notes are both formal written promises to pay an amount of money at a specified date, notes generally tend to be for much smaller amounts and for a shorter period of time. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. Bonds secured by a mortgage on corporate property are called guaranteed bonds. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 7. A discount amortization does not affect the amount of cash paid for bond interest. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.104 - LO: 22-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. Premium on Bonds Payable should be classified as a contra-liability account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.105 - LO: 22-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. If the stated interest rate on bonds is less than the current market rate, the bonds will sell at a discount. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.104 - LO: 22-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 10. A discount amortization effects a gradual reduction of the bonds payable account to zero over time. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.104 - LO: 22-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. Bonds issued that mature at regular intervals are called serial bonds. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. When bonds are issued at a discount, both bonds payable on the balance sheet and interest expense on the income statement are affected. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.104 - LO: 22-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 13. A debenture bond is a common type of secured bond. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. The process of adjusting the bond interest expense account for any premium or discount is called amortization of the premium or discount. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.105 - LO: 22-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. The straight-line method of amortizing a bond premium or discount provides for amortizing an equal amount each time period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.105 - LO: 22-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 16. Bonds issued in a series so that a specified amount of principal matures each year are called term bonds. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. Bonds payable less the discount on bonds payable is called the carrying value of the bonds. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.104 - LO: 22-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. Loss on Redemption generally is reported as other expense near the bottom of the income statement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.104 - LO: 22-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 19. The Discount on Bonds Payable balance is subtracted from Bonds Payable on the income statement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.104 - LO: 22-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. Usually, there is either a gain or a loss involved in the redemption of bonds before their maturity date. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.103 - LO: 22-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. If the interest rate on bonds is the same as the current market rate, the bonds will sell for their face value. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 22. Convertible bonds give the issuing corporation the option of calling for redemption at a stated price before maturity date. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. Debenture bonds are backed by specific assets of the corporation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. If the interest rate on bonds is lower than the current market rate, the bonds will sell at a premium. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 25. The interest rate specified in a bond contract is known as the market rate. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. To determine whether a bond will sell at a price equal to, greater than, or less than face value, compare the stated and market interest rates. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. Bonds Payable is reported as a long-term liability on the corporation's balance sheet. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.106 - LO: 22-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 28. A $100,000 bond issue sold at 103 has a market price of $100,300. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.106 - LO: 22-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. Bonds issued with a provision that they may be called for redemption before the date of maturity are called convertible bonds. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. If a corporation issues term bonds, each bond will have the same maturity date. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 31. Names and addresses of owners of coupon bonds are recorded and kept current in the corporate records. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. Premium on Bonds Payable should be classified as an adjunct-liability account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.105 - LO: 22-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. The sum of bonds payable and premium on bonds payable is called the carrying value of the bonds. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.105 - LO: 22-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 34. An entry to record the sale and issuance of bonds at a discount will include a credit to Discount on Bonds Payable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.104 - LO: 22-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 35. If bonds that originally were sold at face value are redeemed for less than face value, a gain results. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.103 - LO: 22-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. The accumulation and investment of money over a period of years that provides the amount necessary for the redemption of a bond issued at its maturity is called a sinking fund. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.103 - LO: 22-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 37. If cash is paid to a trustee who administers a sinking fund, the corporation would credit the Bond Sinking Fund for the amount of cash paid. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.103 - LO: 22-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. If bonds that originally were sold at a premium are redeemed, the calculation of the gain or loss must take into account the unamortized premium through the date of redemption. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.103 - LO: 22-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 39. When bonds are redeemed at a loss, the journal entry would require a credit to Extraordinary Loss on Early Extinguishment of Debt. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.103 - LO: 22-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 22—Corporations: Bonds 40. Convertible bonds are a. bonds that all have the same maturity date. b. bonds issued in a series so that a specified amount of the bonds matures each year. c. bonds that give the issuing corporation the option of calling the bonds for redemption before the maturity date. d. bonds that give the holder the option of exchanging the bonds for capital stock of the corporation. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 41. Bonds issued giving the holder the option of exchanging the bonds for capital stock of the corporation are called a. term bonds. b. convertible bonds. c. capital stock bonds. d. callable bonds. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 42. When the selling price of a bond is stated at 100, it means that the bonds are selling a. at a premium. b. at a discount. c. below par value. d. at face value. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.106 - LO: 22-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 43. If bonds were being issued with a stated rate of 8% and the market rate is 9%, the bonds would most likely sell at which of the following? a. 108 b. 100 c. 95 d. 80 ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.106 - LO: 22-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 44. Bonds issued in a series so that a specified amount of the bond matures each year are called a. term bonds. b. serial bonds. c. convertible bonds. d. callable bonds. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 45. Bondholders have which of the following relationships with a corporation? a. They are creditors. b. They are owners. c. They become members of the board. d. They are silent managers. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 46. Bonds issued at the same time so that they all have the same maturity date are called a. term bonds. b. serial bonds. c. convertible bonds. d. callable bonds. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 47. The bonds payable account would be classified as a(n) a. current liability. b. adjunct-liability. c. contra-liability. d. long-term liability. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.106 - LO: 22-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 48. The premium on bonds payable account would be classified as a(n) a. current liability. b. adjunct-liability. c. contra-liability. d. noncurrent liability. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.106 - LO: 22-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 49. Bonds secured by a mortgage on corporate property are called a. mortgage bonds. b. property bonds. c. investment bonds. d. adjustment bonds. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 18

Chapter 22—Corporations: Bonds 50. Two of the main factors in determining the price at which bonds will sell are a. the contract rate and the coupon rate. b. the contract rate and the stated rate. c. the market rate and the discount rate. d. the stated rate and the market rate. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 51. The discount on bonds payable account would be classified as a(n) a. current liability. b. adjunct-liability. c. contra-liability. d. noncurrent liability. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.106 - LO: 22-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 19

Chapter 22—Corporations: Bonds 52. Bonds that are backed solely by specific secured assets are called a. mortgage bonds. b. guaranteed bonds. c. collateral bonds. d. debenture bonds. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 53. Bonds issued with a provision that they may be called for redemption before the date of maturity are known as a. convertible bonds. b. term bonds. c. debenture bonds. d. callable bonds. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 54. If the rate of interest on bonds is lower that the current market rate, the bonds will sell at a. a discount. b. a premium. c. face value. d. maturity value. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 55. If the interest rate on bonds is higher than the current market rate, they will sell at a. a discount. b. a premium. c. face value. d. maturity value. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 56. The sale and issuance of $400,000, 8% bonds with a market rate of 8% would involve debiting Cash for a. $32,000. b. $368,000. c. $400,000. d. $432,000. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min. 57. If bonds were originally sold at face value and the corporation pays more than the face amount when the bonds are redeemed, there is a a. loss. b. gain. c. premium. d. discount. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.103 - LO: 22-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 58. Bond Interest Payable is reported as a(n) a. current liability on the income statement. b. current liability on the balance sheet. c. adjunct-liability on the balance sheet. d. contra-liability on the income statement. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.106 - LO: 22-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 59. Usually, there is a gain or loss involved when bonds are redeemed before maturity. The gain or loss is the difference between a. the amount paid to redeem the bonds and the carrying value of the bonds. b. the maturity value of the bonds and the market value of the bonds. c. the carrying value of the bonds and the face value of the bonds. d. the maturity value of the bonds and the carrying value of the bonds. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.103 - LO: 22-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 60. When selling bonds at a premium, the premium received effectively a. reduces the cost of borrowing. b. increases the cost of borrowing. c. does not affect the cost of borrowing. d. reduces the amount of cash received when bonds are sold. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.105 - LO: 22-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 61. A bond issue of $500,000 selling at 100, would require a journal entry including a a. credit to Cash of $500,000. b. credit to Premium on Bonds Payable for $500,000. c. credit to Bonds Payable of $500,000. d. debit to Bonds Payable of $500,000. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.106 - LO: 22-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 22—Corporations: Bonds 62. A ten-year bond issue of $400,000, interest rate of 9% paid semiannually, is sold for $440,000 when the market rate is 8%. The bonds were not sold between interest dates and the straight-line amortization method is used. The bond interest expense for the first interest payment would be a. $2,000. b. $16,000. c. $18,000. d. $32,000. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.105 - LO: 22-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min. 63. A ten-year bond issue of $400,000, interest rate of 9% paid semiannually, is sold for $440,000 when the market rate is 8%. The bonds were not sold between interest dates and the straight-line amortization method is used. The entry to record the first interest payment would include a. a debit to Cash of $18,000. b. a debit to Bond Interest Payable of $18,000. c. a debit to Premium on Bonds Payable of $2,000. d. a credit to Bond Interest Expense of $16,000. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.105 - LO: 22-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 22—Corporations: Bonds 64. The year-end adjusting entry required for bonds issued at a discount would require a. a debit to Bond Interest Expense, a debit to Discount on Bonds Payable, and a credit to Cash. b. a debit to Bond Interest Expense, a debit to Discount on Bonds Payable, and a credit to Bond Interest Payable. c. a debit to Bond Interest Expense, a credit to Discount on Bonds Payable, and a credit to Cash. d. a debit to Bond Interest Expense, a credit to Discount on Bonds Payable, and a credit to Bond Interest Payable. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.104 - LO: 22-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min. 65. The carrying value of bonds is calculated by a. subtracting the premium on bonds payable account balance from the bonds payable account balance. b. adding the premium on bonds payable account balance to the bonds payable account balance. c. adding the discount on bonds payable account balance to the bonds payable account balance. d. adding the bonds payable account balance to the bond interest payable account balance. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.105 - LO: 22-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 66. A bond issue of $100,000 selling at 98, would require a journal entry including a a. debit to Bonds Payable for $98,000. b. credit to Cash for $98,000. c. credit to Premium of Bonds Payable for $2,000. d. debit to Discount on Bonds Payable for $2,000. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.104 - LO: 22-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min. 67. Bonds classified as to the timing of principal payments include all of the following EXCEPT a. term bonds. b. serial bonds. c. debenture bonds. d. callable bonds. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 68. A $200,000, 8% bond issue was sold at face value and later redeemed at 104% of face value. The corporation would have a a. loss of $8,000. b. gain of $8,000. c. loss of $20,000. d. gain of $20,000. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.103 - LO: 22-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Applying NOTES: 1 min. 69. HiLi Corporation had the following bond issue: Date of issue/sale: May 1, 20-A Principal: $500,000 Sale price of bonds: 100 Life of bonds: 10 years Stated rate: 6% a year payable semiannually on October 31 and April 30 Required: Prepare the following general journal entries. a. The issuance of the bonds on May 1, 20-A. b. The first interest payment for 20-A. c. The adjusting entry for December 31, 20-A. d. The reversing entry for January 1, 20-B. ANSWER:

a. GENERAL JOURNAL Date May 1

Description

Page 1 Post Ref.

Cash Bonds Payable

Debit 500,000.00

Credit 500,000.00

b. GENERAL JOURNAL Description Date Oct. 31 Bond Interest Expense Cash

Page 1 Post Ref.

Debit 15,000.00

Credit 15,000.00

c. GENERAL JOURNAL Date Cengage Learning Testing, Powered by Cognero

Description

Page 1 Post Ref.

Debit

Credit Page 28

Chapter 22—Corporations: Bonds Dec. 31 Bond Interest Expense Bond Interest Payable

5,000.00 5,000.00

d. GENERAL JOURNAL Description Date Jan. 1 Bond Interest Payable Bond Interest Expense

Page 1 Post Ref.

Debit 5,000.00

Credit 5,000.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.106 - LO: 22-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Applying NOTES: 10 min. 70. Island Cove Corporation had the following bond issue: Date of issue/sale: May 1, 20-A Principal: $500,000 Sale price of bonds: 104 Life of bonds: 10 years Stated rate: 6% a year payable semiannually on October 31 and April 30 Required: Prepare the following general journal entries. a. The issuance of the bonds on May 1, 20-A. b. The first interest payment for 20-A. c. The adjusting entry for December 31, 20-A. d. The reversing entry for January 1, 20-B. ANSWER:

a. GENERAL JOURNAL Date May 1

Description

Page 1 Post Ref.

Cash Premium on Bonds Payable Bonds Payable

Debit 520,000.00

Credit 20,000.00 500,000.00

b. GENERAL JOURNAL Description Date Oct. 31 Bond Interest Expense Premium on Bonds Payable Cash

Page 1 Post Ref.

Debit 14,000.00 1,000.00

Credit

15,000.00

c. GENERAL JOURNAL Cengage Learning Testing, Powered by Cognero

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Chapter 22—Corporations: Bonds

Description Date Dec. 31 Bond Interest Expense Premium on Bonds Payable Bond Interest Payable

Post Ref.

Debit 4,667.00 333.00

Credit

5,000.00

d. GENERAL JOURNAL Date Jan. 1

Description Bond Interest Payable Premium on Bonds Payable Bond Interest Expense

Page 1 Post Ref.

Debit 5,000.00

Credit 333.00 4,667.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.105 - LO: 22-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Applying NOTES: 10 min. 71. Fireside, Inc. had the following bond issue: Date of issue/sale: May 1, 20-A Principal: $400,000 Sale price of bonds: 96 Life of bonds: 10 years Stated rate: 6% a year payable semiannually on October 31 and April 30 Required: Prepare the following general journal entries. a. The issuance of the bonds on May 1, 20-A. b. The first interest payment for 20-A. c. The adjusting entry for December 31, 20-A. d. The reversing entry for January 1, 20-B. ANSWER:

a. GENERAL JOURNAL Date May 1

Description

Page 1 Post Ref.

Cash Discount on Bonds Payable Bonds Payable

Debit 384,000.00 16,000.00

Credit

400,000.00

b. GENERAL JOURNAL Description Date Oct. 31 Bond Interest Expense Discount on Bonds Payable Cengage Learning Testing, Powered by Cognero

Page 1 Post Ref.

Debit 12,800.00

Credit 800.00 Page 30

Chapter 22—Corporations: Bonds Cash

12,000.00

c. GENERAL JOURNAL Description Date Dec. 31 Bond Interest Expense Discount on Bonds Payable Bond Interest Payable

Page 1 Post Ref.

Debit 4,267.00

Credit 267.00 4,000.00

d. GENERAL JOURNAL Date Jan. 1

Description Bond Interest Payable Discount on Bonds Payable Bond Interest Expense

Page 1 Post Ref.

Debit 4,000.00 267.00

Credit

4,267.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.104 - LO: 22-4 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Applying NOTES: 15 min.

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Chapter 22—Corporations: Bonds 72. City Slicker Corporation pays $55,000 into a bond sinking fund each year for the future redemption of bonds. During the first year, the fund earns $1,475. When the bonds mature, there is a sinking fund balance of $612,000, and $600,000 is needed to redeem the bonds. Required: Prepare the following general journal entries. a. The initial sinking fund deposit. b. The first year's earnings. c. The redemption of the bonds. d. The return of excess cash to the corporation. ANSWER:

a. GENERAL JOURNAL Date

Description Bond Sinking Fund Cash

Page 1 Post Ref.

Debit 55,000.00

Credit 55,000.00

b. GENERAL JOURNAL Date

Description Bond Sinking Fund Sinking Fund Earnings

Page 1 Post Ref.

Debit 1,475.00

Credit 1,475.00

c. GENERAL JOURNAL Date

Description Bonds Payable Bond Sinking Fund

Page 1 Post Ref.

Debit 600,000.00

Credit 600,000.00

d. GENERAL JOURNAL Date

Description Cash Bond Sinking Fund

Page 1 Post Ref.

Debit 12,000.00

Credit 12,000.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.103 - LO: 22-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Applying NOTES: 10 min.

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Chapter 22—Corporations: Bonds 73. Roof Top Corporation had the following bond issue: Date of issue/sale: May 1, 20-A Principal: $400,000 Sale price of bonds: 98 Life of bonds: 10 years Stated rate: 6% a year payable semiannually on October 31 and April 30 Required: Prepare the following general journal entries. a. The issuance of the bonds on May 1, 20-A. b. The first interest payment. c. The redemption of $100,000 worth of bonds on May 1, 20-D, at 99. ANSWER:

a. GENERAL JOURNAL Date May 1

Description

Page 1 Post Ref.

Cash Discount on Bonds Payable Bonds Payable

Debit 392,000.00 8,000.00

Credit

400,000.00

b. GENERAL JOURNAL Description Date Oct. 31 Bond Interest Expense Discount on Bonds Payable Cash

Page 1 Post Ref.

Debit 12,400.00

Credit 400.00 12,000.00

c. GENERAL JOURNAL Date May 1

Description Bonds Payable Loss on Redemption Discount on Bonds Payable Cash

Page 1 Post Ref.

Debit 100,000.00 400.00

Credit

1,400.00 99,000.00

POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.103 - LO: 22-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Applying NOTES: 15 min. 74. Clearview Corporation had the following bond issue: Date of issue/sale: March 1, 20-A Sale price of bonds: 103 Cengage Learning Testing, Powered by Cognero

Face value: $700,000 Life of bonds: 10 years Page 33

Chapter 22—Corporations: Bonds Stated rate: 6% a year payable semiannually on August 31 and February 28 Required: Prepare the following general journal entries. a. The issuance of the bonds on March 1, 20-A. b. The interest payment and premium amortization on the bonds for the first six months. c. The year-end adjusting entry for interest and premium amortization. d. The reversing entry for January 1, 20-B. ANSWER:

a. GENERAL JOURNAL Date Mar. 1

Description

Page 1 Post Ref.

Cash Premium on Bonds Payable Bonds Payable

Debit 721,000.00

Credit 21,000.00 700,000.00

b. GENERAL JOURNAL Description Date Aug. 31 Bond Interest Expense Premium on Bonds Payable Cash

Page 1 Post Ref.

Debit 19,950.00 1,050.00

Credit

21,000.00

c. GENERAL JOURNAL Description Date Dec. 31 Bond Interest Expense Premium on Bonds Payable Bond Interest Payable

Page 1 Post Ref.

Debit 13,300.00 700.00

Credit

14,000.00

d. GENERAL JOURNAL Date Jan. 1

Description Bond Interest Payable Bond Interest Expense Premium on Bonds Payable

Page 1 Post Ref.

Debit 14,000.00

Credit 13,300.00 700.0

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.106 - LO: 22-2 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Applying NOTES: 15 min.

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Chapter 22—Corporations: Bonds 75. Gia Company had the following bond issue: Date of issue/sale: April 1, 20-A Face value: $200,000 Sale price of bonds: 99 Life of bonds: 10 years Stated interest rate: 6% a year payable semiannually on September 30 and March 31 Required: Prepare the following general journal entries. a. The issuance of the bonds on April 1, 20-A. b. The interest payment and premium amortization for first six months. c. The redemption of $50,000 worth of bonds on April 1, 20-E, at 102. ANSWER:

a. GENERAL JOURNAL Date Apr. 1

Description

Page 1 Post Ref.

Cash Discount on Bonds Payable Bonds Payable

Debit 198,000.00 2,000.00

Credit

200,000.00

b. GENERAL JOURNAL Description Date Sept. 30 Bond Interest Expense Discount on Bonds Payable Cash c. GENERAL JOURNAL Date Apr. 1

Description Bonds Payable Loss on Redemption Discount on Bonds Payable Cash

Page 1 Post Ref.

Debit 6,100.00

Credit 100.00 6,000.00 Page 1

Post Ref.

Debit 50,000.00 1,300.00

Credit

300.00 51,000.00

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Chapter 22—Corporations: Bonds 76. Omni Video Corporation had the following bond issue: Date of issue/sale: May 1, 20-A Face value: $300,000 Sale price of bonds: 97 Life of bonds: 10 years Stated interest rate: 5% a year payable semiannually on October 31 and April 30 Required: Prepare the following general journal entries. a. The issuance of the bonds on May 1, 20-A. b. The interest payment and discount amortization on the bonds for October 31, 20-A. c. The redemption of $100,000 worth of bonds on November 1, 20-F, at 98. ANSWER:

a. GENERAL JOURNAL Date May 1

Description

Page 1 Post Ref.

Cash Discount on Bonds Payable Bonds Payable

Debit 291,000.00 9,000.00

Credit

300,000.00

b. GENERAL JOURNAL Description Date Oct. 31 Bond Interest Expense Discount on Bonds Payable Cash

Page 1 Post Ref.

Debit 7,950.00

Credit 450.00 7,500.00

c. GENERAL JOURNAL Date Nov. 1

Description Bonds Payable Gain on Redemption Discount on Bonds Payable Cash

Page 1 Post Ref.

Debit 100,000.00

Credit 650.00 1,350.00 98,000.00

POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.103 - LO: 22-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Analytic TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Applying NOTES: 15 min. 77. Baradzi Corporation had the following bond issue: Date of issue/sale: June 1, 20-A Sale price of bonds: 101 Cengage Learning Testing, Powered by Cognero

Face value: $600,000 Life of bonds: 10 years Page 36

Chapter 22—Corporations: Bonds Stated interest rate: 6% a year payable semiannually on November 30 and May 31 Required: Prepare the following general journal entries. a. The issuance of the bonds on June 1, 20-A. b. The interest payment and premium amortization on the bonds for November 30, 20-A. c. The year-end adjusting entry for interest expense and premium amortization, 20-A. d. The reversing entry for January 1, 20-B. ANSWER:

a. GENERAL JOURNAL Date June 1

Description

Page 1 Post Ref.

Cash Premium on Bonds Payable Bonds Payable

Debit 606,000.00

Credit 6,000.00 600,000.00

b. GENERAL JOURNAL Description Date Nov. 30 Bond Interest Expense Premium on Bonds Payable Cash

Page 1 Post Ref.

Debit 17,700.00 300.00

Credit

18,000.00

c. GENERAL JOURNAL Description Date Dec. 31 Bond Interest Expense Premium on Bonds Payable Bond Interest Payable

Page 1 Post Ref.

Debit 2,950.00 50.00

Credit

3,000.00

d. GENERAL JOURNAL Date Jan. 1

Description Bond Interest Payable Bond Interest Expense Premium on Bonds Payable

Page 1 Post Ref.

Debit 3,000.00

Credit 2,950.00 50.00

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Chapter 22—Corporations: Bonds 78. Perez Corporation pays $47,000 into a bond sinking fund each year for the future redemption of bonds. During the first year, the fund earns $3,825. When the bonds mature, there is a balance in the sinking fund of $417,000, of which $400,000 is used to redeem the bonds.

Required: Prepare the following general journal entries. a. The initial sinking fund deposit. b. The first year's interest for the sinking fund. c. The redemption of the bonds. d. The return of excess cash to the corporation. ANSWER:

a. GENERAL JOURNAL Date

Description Bond Sinking Fund Cash

Page 1 Post Ref.

Debit 47,000.00

Credit 47,000.00

b. GENERAL JOURNAL Date

Description Bond Sinking Fund Sinking Fund Earnings

Page 1 Post Ref.

Debit 3,825.00

Credit 3,825.00

c. GENERAL JOURNAL Date

Description Bonds Payable Bond Sinking Fund

Page 1 Post Ref.

Debit 400,000.00

Credit 400,000.00

d. GENERAL JOURNAL Date

Description Cash Bond Sinking Fund

Page 1 Post Ref.

Debit 17,000.00

Credit 17,000.00

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Chapter 22—Corporations: Bonds 79. ____________________ bonds are backed solely by the general credit of the corporation issuing the bonds. ANSWER: Debenture POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 80. The ____________________ is the amount to be paid to the bondholder at maturity. ANSWER: principal POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 81. The difference between the face value and the price of a bond when the current market interest rate is greater than the stated rate of that bond is called a(n) ____________________. ANSWER: discount POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 82. The accumulation and investment of money over a period of years to provide the amount needed for the redemption of bonds is a(n) ____________________. ANSWER: bond sinking fund POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.103 - LO: 22-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 83. The rate of interest that bonds pay based on face value is the ____________________ rate. ANSWER: stated POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 84. The ownership of ____________________ bonds is recorded in the corporate records. ANSWER: registered POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 85. The interest rate that can be earned on investments similar to the specific bond issue is the ____________________. ANSWER: market rate POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 86. ____________________ bonds give the holder the option of exchanging the bonds for capital stock of the corporation. ANSWER: Convertible POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 87. The formal written agreement for issuing bonds is called a(n) ____________________. ANSWER: bond indenture POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.103 - LO: 22-5 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 88. The process of adjusting the bond interest expense account for any premium or discount is called ____________________. ANSWER: amortization POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.105 - LO: 22-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 89. ____________________ bonds are backed by specific corporate assets. ANSWER: Secured POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 90. A(n) ____________________ is a written promise to pay a specific sum of money at a specific future date. ANSWER: bond POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 91. ____________________ bonds give the issuing corporation the option of redeeming the bonds before the maturity date. ANSWER: Callable POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 92. The amount written on the bond certificate is known as its ____________________. ANSWER: face value POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 93. Bonds payable plus the premium or less the discount on bonds payable equals the ____________________. ANSWER: carrying value POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.105 - LO: 22-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 22—Corporations: Bonds 94. ____________________ bonds all have the same maturity date. ANSWER: Term POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 95. The ____________________ is the difference between the face value and the price of a bond when the current market interest rate is less than the stated rate of that bond. ANSWER: premium POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 96. ____________________ bonds are issued in a series so that a specified amount of the bonds mature each year. ANSWER: Serial POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.102 - LO: 22-1 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. amortization b. bond c. bond indenture d. bond sinking fund e. callable bonds f. carrying value g. convertible bonds Cengage Learning Testing, Powered by Cognero

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Chapter 22—Corporations: Bonds h. coupon bonds i. debenture bonds j. discount k. face value l. market rate m. mortgage bonds n. premium o. principal p. registered bonds q. secured bonds r. serial bonds s. stated rate t. term bonds DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.102 - LO: 22-1 COLL.HEIN.17.103 - LO: 22-5 COLL.HEIN.17.105 - LO: 22-3 ACCREDITING STANDARDS: AICPA FN-Measurement BUSPROG: Communication TOPICS: ACBSP: APC-22-Long-Term Liabilities Reporting KEYWORDS: Bloom's: Remembering NOTES: 1 min. 97. The difference between the face value and the price of a bond when the current market interest rate is less than the stated rate of that bond. ANSWER: n POINTS: 1 98. A written promise to pay a specific sum of money at a specific future date. ANSWER: b POINTS: 1 99. The interest rate that can be earned on investments similar to the specific bond issue. ANSWER: l POINTS: 1 100. The amount to be paid to the bondholder at maturity. ANSWER: o POINTS: 1 101. The process of adjusting the bond interest expense account for any premium or discount. ANSWER: a POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Chapter 22—Corporations: Bonds 102. The rate of interest that the bonds pay based on face value. ANSWER: s POINTS: 1 103. Bonds secured by a mortgage on corporate property such as real estate or equipment. ANSWER: m POINTS: 1 104. The accumulation and investment of money over a period of years to provide the amount needed for the redemption of bonds. ANSWER: d POINTS: 1 105. Bonds that all have the same maturity date. ANSWER: t POINTS: 1 106. Bonds whose ownership generally is not recorded by the corporation. ANSWER: h POINTS: 1 107. The amount written on the face of the bond certificate. ANSWER: k POINTS: 1 108. The formal written agreement for issuing bonds. ANSWER: c POINTS: 1 109. Bonds issued in a series so that a specified amount of the bonds matures each year. ANSWER: r POINTS: 1 110. Bonds backed solely by the general credit of the corporation issuing the bonds. ANSWER: i POINTS: 1 111. Bonds payable plus the premium or less the discount on bonds payable. ANSWER: f POINTS: 1 112. Bonds whose ownership is recorded in the corporate records. ANSWER: p POINTS: 1

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Chapter 22—Corporations: Bonds 113. Bonds that give the issuing corporation the option of calling the bonds for redemption before the maturity date. ANSWER: e POINTS: 1 114. Bonds that are backed by specific corporate assets. ANSWER: q POINTS: 1 115. Bonds that give the holder the option of exchanging the bonds for capital stock of the corporation. ANSWER: g POINTS: 1 116. The difference between the face value and the price of a bond when the current market interest rate is greater than the stated rate of that bond. ANSWER: j POINTS: 1

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Chapter 23—Statement of Cash Flows 1. Achieving profitability will automatically assure sufficient amounts of cash. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.107 - LO: 23-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. Although the accrual basis of accounting is an excellent method for measuring profitability, it does not explain why a company's liquidity has improved or worsened. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.107 - LO: 23-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 3. An increase or decrease in cash results from a combination of the operating, investing, and capitalizing activities of a business. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.107 - LO: 23-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 4. Proceeds from the sale of productive assets (property, plant, equipment, and intangible assets, etc.) are one example of investing activities. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 5. Interest received on loans made to borrowers is an example of a financing activity. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. Proceeds from borrowing money through a mortgage is an example of an investing activity. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 7. The accrual basis of accounting offers a direct explanation of why a firm's liquidity, as reported on the balance sheet, has improved or worsened. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.107 - LO: 23-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 23—Statement of Cash Flows 8. The income statement adequately reflects all operating, investing, and financing activities. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.107 - LO: 23-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. The statement of cash flows categorizes all cash flow into four major types of activities: planning, investing, financing, and operating. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.107 - LO: 23-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 10. If dividends begin to exceed the cash generated from operating activities, it could imply that the business is about to liquidate. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.109 - LO: 23-6 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. Under the cash basis of accounting, revenues are recognized when cash is received, regardless of when it is earned. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.107 - LO: 23-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 12. Financing activities are those transactions involving the purchase and sale of long-term assets, investing in equity securities, lending money, and collecting the principal on the related loans. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 13. The sum of the cash generated or used by each section of the statement of cash flows should equal the difference between the beginning and ending balance of the cash and cash equivalent accounts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.110 - LO: 23-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 14. The accuracy of the statement of cash flows can be verified by computing the change in the balance of the cash and cash equivalents. a. True b. False ANSWER: POINTS: DIFFICULTY: LEARNING OBJECTIVES:

True 1 Easy COLL.HEIN.17.111 - LO: 23-4 COLL.HEIN.17.112 - LO: 23-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. Under the indirect method, debits to the investing and financing sections represent inflows of cash. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.109 - LO: 23-6 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 16. Financing activities are those transactions dealing with the exchange of cash between the firm and its owners (stockholders) and creditors. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. The investing activities section of the statement of cash flows includes the purchasing and selling of long-term assets, investing in the debt and equity securities of other businesses, making loans, and collecting the principal on loans. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 18. Dividends received on investments made in the stock of other corporations is an example of a financing activity. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 19. The statement of cash flows is divided into three sections: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 20. Cash generated from operating activities has traditionally been computed by combining the direct and the indirect methods. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. The managers of a business have the dual objective of generating net income (profitability) and keeping the enterprise solvent (liquidity). a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.107 - LO: 23-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 22. Since interest revenue, interest expense, and dividend revenue are reported on the income statement, they are also considered cash flow from operating activities. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.107 - LO: 23-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. Operating activities include transactions and events associated with selling a product or providing a service and are related to the revenues and expenses reported on the income statement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 24. Under the indirect method of reporting cash flows, revenues and expenses reported on the income statement are adjusted to reflect the amount of cash received or expended for each item. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 25. Under the direct method of reporting cash flows, net income is adjusted for transactions impacting both net income and cash flows, but in different ways. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 26. Revenues recorded during an accounting period must be converted to the amount of cash received from customers during the year in order to prepare a statement of cash flows under the direct method. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. If all sales were made for cash, it would not be necessary to adjust the sales reported on the income statement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 28. The rate which credit customers pay their bills has no effect on the cash received from sales during an accounting period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. Adjusting entries to record depreciation expense increase operating expenses and reduce net income but do not require an outflow of cash. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 30. Financing activities include transactions with owners and creditors. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 31. Probably the most important indicator of an organization's financial health is the net cash flow from operating activities. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.109 - LO: 23-6 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. Increases or decreases in net income always increase or decrease cash by the same amount. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.107 - LO: 23-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 23—Statement of Cash Flows 33. Under the indirect method, an increase in Accounts Receivable must be added to net income when computing cash from operating activities. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.107 - LO: 23-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 34. Under the indirect method, net income is considered the primary source of cash from operating activities. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.107 - LO: 23-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 35. Under the indirect method, a decrease in Accounts Payable must be subtracted from net income when computing cash from operating activities. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.107 - LO: 23-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. Under the indirect method, Depreciation Expense must be added to net income when computing cash from operating activities. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.107 - LO: 23-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 37. Gains on the sale of plant and equipment should be subtracted from net income when computing cash from operating activities. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.107 - LO: 23-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. A noncash expense is an expense that does not require an outflow of cash. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 39. (Appendix) Although the formats are different, the amount of cash flows from operating activities reported under the direct and indirect methods is always equal. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 40. (Appendix) To determine the cash generated from operating activities under the direct method, cost of goods sold must be adjusted to reflect the cash paid to suppliers for merchandise. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 41. (Appendix) The first step in computing the cash paid for merchandise is to determine the amount of inventory purchased during the year. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 42. (Appendix) Payments to employees and to the government are examples of cash outflows resulting from operating activities. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 43. (Appendix) An increase in Accounts Receivable represents an increase in the cash generated from sales. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 44. (Appendix) A decrease in Accounts Receivable represents an increase in the cash generated from sales. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 45. (Appendix) Under the direct method, each line of the income statement is converted to cash paid or received. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 23—Statement of Cash Flows 46. (Appendix) A decrease in Accounts Receivable is deducted from net sales to compute cash collected from customers. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 47. (Appendix) An increase in Merchandise Inventory is deducted from cost of goods sold to compute the cash paid to suppliers. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 48. (Appendix) A decrease in Accounts Payable is deducted from cost of goods sold to compute the cash paid to suppliers. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 49. (Appendix) Cash flows from investing activities are computed and reported in the same manner under the direct and indirect method. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 50. (Appendix) Cash flows from financing activities are computed and reported in the same manner under the direct and indirect method. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 51. The purpose of a cash flow statement is to a. show the profits generated. b. show how cash was generated and used during a period. c. show the expenses incurred in doing business. d. show the revenue earned. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.107 - LO: 23-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 52. Probably the most important indicator of financial health is the net cash flow from a. operating activities. b. investing activities. c. financing activities. d. buying and selling activities. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 53. An example of a cash inflow from operating activities is a. net income. b. issuance of preferred stock. c. buying and selling debt and equity securities. d. lending money and collecting the principal on the related loans. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 54. An example of a cash inflow from financing activities is a. the sale of common stock. b. interest paid on notes payable. c. payment for additional inventory. d. buying debt and equity securities. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 55. Transactions involving the purchase and sale of long-term assets, investing in equity securities, lending money, and collecting the principal on related loans are called a. investing activities. b. operating activities. c. financing activities. d. buying and selling activities. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 56. An example of a cash inflow from investing activities is a. interest received on loans. b. the purchase of plant and equipment. c. the sale of investments in equity securities. d. the issuance of stock. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 57. An example of a cash outflow from investing activities is a. issuance of a notes payable. b. making a loan to another company. c. cash dividends paid. d. the purchase of treasury stock. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 58. Under the direct and indirect methods of reporting the statement of cash flows, only a. the operating activities section is different. b. the financing activities section is different. c. the investing activities section is different. d. the operating and financing activities sections are different. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 59. Which activities represent the company's primary source of cash over the life of the business? a. financing activities b. investing activities c. operating activities d. buying and selling activities ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 60. Which of the following is NOT a cash outflow from an investing activity? a. a loan made to another party b. a payment made to acquire property c. a purchase of treasury stock d. a purchase of equity securities ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 61. Which of the following is NOT a cash inflow from a financing activity? a. proceeds from the issuance of stock b. interest received on loans made to outsider investors c. additional investments by the owners d. proceeds from a mortgage ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 62. Which of the following is NOT a cash outflow from an operating activity? a. a withdrawal by the owners b. a payment for the acquisition of inventory c. a payment to the government d. a payment for interest on a loan ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 63. Those transactions dealing with the exchange of cash between the firm and its owners (stockholders) and creditors are called a. investing activities. b. operating activities. c. financing activities. d. planning activities. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 64. Those transactions dealing primarily with selling a product or providing a service related to the revenues and expenses reported on the income statement are called a. investing activities. b. operating activities. c. financing activities. d. planning activities. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 65. An example of a cash inflow from operating activities is a. cash received from the sale of merchandise. b. proceeds from the sale of productive assets. c. proceeds from discounting notes receivable. d. proceeds from additional investments by the owners. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 66. An example of a cash outflow from operating activities is a. loans made by the company to other parties. b. a payment for employee salaries. c. payments to acquire treasury stock. d. payments to acquire investments in debt and equity securities. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 67. Operating activities are transactions and events associated with selling a product or providing a service related to a. the revenues and expenses reported on the income statements. b. the assets and liabilities reported on the balance sheet. c. the net income reported on the statement of retained earnings. d. the retained earnings reported on the balance sheet. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 68. A statement of cash flows is prepared from the a. balance sheet from the beginning and the end of the period. b. general journal. c. accounts receivable ledger. d. accounts payable ledger. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.110 - LO: 23-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 69. The method of reporting cash flows from operating activities under which income is adjusted for transactions impacting both net income and cash flows, but in different ways, is called the a. direct method. b. indirect method. c. combination method. d. adjusted method. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 70. Cash generated from operating activities may be computed and reported using a. the direct method only. b. the indirect method only. c. either the direct and indirect methods. d. the combination method. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 71. If $10,000 was generated from operations, $4,000 used for investing activities, and $6,000 provided by financing activities, the cash balance must have increased by a. $6,000. b. $8,000. c. $12,000. d. $20,000. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.110 - LO: 23-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 72. The accuracy of the statement of cash flows can be verified by computing the change in the balance of the a. cash and cash equivalent accounts. b. equity account. c. revenue account. d. asset and liability accounts. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.110 - LO: 23-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 73. The method of reporting cash flows from operating activities under which revenues and expenses reported on the income statement are adjusted to reflect the amount of cash received or expended for each item is called the a. direct method. b. indirect method. c. combination method. d. adjusted method. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 74. To qualify as "cash equivalents," the investment must be a. readily convertible to a known amount of cash. b. convertible to cash within a one-year period of time. c. convertible to cash without a significant loss of value. d. convertible to cash within a five-year period of time. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 75. Some investing and financing activities involve no cash flows so they a. represent no significant financial change. b. should be included in the three main sections of the statement of cash flows. c. should be reported in a separate section of the statement of cash flows. d. must be converted to cash at the end of the accounting period. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 76. Which of the following adjustments would NOT be made to net income when computing cash from operating activities? a. add an increase in Accounts Payable b. add depreciation expense c. add an increase in Accounts Receivable d. subtract the gain on sale of land ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 77. Which of the following adjustments would NOT be made to net income when computing cash from operating activities? a. add an increase in Accrued Interest Payable b. deduct the purchase of store equipment c. add the decrease in Merchandise Inventory d. add the reduction in Accounts Receivable ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 78. (Appendix) When preparing a schedule for the calculation of cash generated from operating activities under the direct method, the decrease in Merchandise Inventory is a. added to cost of goods sold. b. added to operating expenses. c. subtracted from cost of goods sold. d. subtracted from operating expenses. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 79. (Appendix) When preparing a schedule for the calculation of cash generated from operating activities under the direct method, an increase in Prepaid Insurance is a. subtracted from cost of goods sold. b. added to cost of goods sold. c. added to operating expenses. d. subtracted from operating expenses. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 80. (Appendix) When preparing a schedule for the calculation of cash generated from operating activities under the direct method, an increase in Depreciation Expense is a. subtracted from operating expenses. b. added to operating expenses. c. subtracted from net income. d. added to net income. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 81. (Appendix) When preparing a schedule for the calculation of cash generated from operating activities under the direct method, a decrease in Accounts Receivable is a. added to net sales. b. subtracted from net sales. c. added to operating expenses. d. subtracted from cost of goods sold. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 82. Tree Top Company's comparative balance sheets as of December 31, 20-A and 20-B show the following with regard to investing and financing activities:

Building Equipment Notes payable Common stock Paidin capital in excess of par¾common stock Retained earnings

Dec. 31, 20-B $358,000 111,000 38,000 256,000 56,000 231,000

Dec. 31, 20-A $0 0 33,000 192,000 38,000 158,000

Net income for the year 20-B was $98,000, and cash dividends of $25,000 were declared and paid. Determine the amount of cash received and paid for financing and investing activities and the cash flows as they would appear on Tree Top Company's statement of cash flows for the year ended December 31, 20-B. ANSWER: Tree Top Company Statement of Cash Flows (partial) For the Year Ended December 31, 20-B Investing activities: Purchased building Purchased equipment Net cash used by investing activities Financing activities: Borrowed on notes payable Issuance of common stock Cash dividend declared and paid Net cash provided by financing activities POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Applying NOTES: 5 min.

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$(358,000) (111,000) $(469,000) $ 5,000 82,000 (25,000) $62,000

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Chapter 23—Statement of Cash Flows 83. The following information was taken from the financial statements of Health and Racquet Company as of December 31, 20-B and 20-A. Net income Balance sheet data: Accounts receivable Accounts payable

$227,000 20-B $33,000 13,700

20-A $28,000 6,500

Required: Compute cash flows from operating activities for 20-B. Net income Adjustments for changes in current assets and liabilities related to operating activities: Increase in accounts receivable Increase in accounts payable Net cash provided by operating activities POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Applying NOTES: 5 min. ANSWER:

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$227,000

(5,000) 7,200 $229,200

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Chapter 23—Statement of Cash Flows 84. The income statement for Captree Landscaping is shown below. Assume that all revenues and expenses were for cash and that land was sold for $40,000. There were no other investing or financing activities during the year. The cash balances at the beginning and end of the year were $53,000 and $140,000. Prepare a statement of cash flows. Captree Landscaping Income Statement For the Year Ended December 31, 20-Sales (all cash) Wages expense (all cash) Operating income Gain on sale of land Net income

$115,000 (68,000) $ 47,000 3,000 $ 50,000

ANSWER: Captree Landscaping Statement of Cash Flows For the Year Ended December 31, 20-Cash flows from operating activities: Net income $50,000 Less gain on sale of land (3,000) Net cash provided by operating activities Investing activities: Sold land Net increase in cash Cash, January 1, 20-Cash, December 31, 20-POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.107 - LO: 23-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Applying NOTES: 10 min.

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$ 47,000 40,000 $ 87,000 53,000 $140,000

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Chapter 23—Statement of Cash Flows 85. The following information was taken from the financial statements of Cozy Corners Company as of December 31, 20B and 20-A. Income statement data: Depreciation expense Loss on sale of equipment Net income

20-B $ 28,400 7,300 313,000

Balance sheet data: Accounts receivable Merchandise inventory Accounts payable Accrued interest payable

20-B $46,000 35,000 27,000 6,000

20-A $50,000 28,000 24,000 8,000

Required: Compute cash flows from operating activities for 20-B. Net income Adjustments for changes in current assets and liabilities related to operating activities: Decrease in accounts receivable Increase in merchandise inventory Increase in accounts payable Decrease in accrued interest payable Noncash expenses and other adjustments: Loss on sale of equipment Depreciation expense Net cash provided by operating activities POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Applying NOTES: 15 min. ANSWER:

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$313,000

4,000 (7,000) 3,000 (2,000) 7,300 28,400 $346,700

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Chapter 23—Statement of Cash Flows 86. The income statement for Chin Consulting is shown below. Assume that all revenues and expenses were for cash and that land was sold for $48,000. There were no other investing or financing activities during the year. The cash balances at the beginning and end of the year were $63,000 and $142,000. Prepare a statement of cash flows. Chin Consulting Income Statement For the Year Ended December 31, 20-Sales (all cash) Wages expense (all cash) Operating income Gain on sale of land Net income

$112,000 81,000 $ 31,000 7,000 $ 38,000

ANSWER: Chin Consulting Statement of Cash Flows For the Year Ended December 31, 20-Cash flows from operating activities: Net income $38,000 Less gain on sale of land (7,000) Net cash provided by operating activities Investing activities: Sold land Net increase in cash Cash, January 1, 20-Cash, December 31, 20-POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.107 - LO: 23-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Applying NOTES: 15 min.

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$ 31,000 48,000 $ 79,000 63,000 $142,000

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Chapter 23—Statement of Cash Flows 87. (Appendix) The following activities took place at Amity Harbor Corporation during the past year. Indicate whether each activity is a cash inflow (+) or cash outflow (−), and whether it is an operating (O), investing (I), or financing (F) activity.

a. b. c. d. e. f. g. h. i. j. k. l.

Salaries paid to employees Payment of dividends to our stockholders Payment to purchase productive assets Proceeds from the sale of productive assets Payment for the purchase of inventory Interest received on loans made to outside entities Payments to suppliers and for other expenses Payments to purchase treasury stock Repayment of the principal on loans Cash receipts from sale of services Proceeds from the issuance of common stock Dividends received on investment made in the stock of another corporation

Inflow/ Outflow Activity _______ ______ _______ ______ _______ ______ _______ ______ _______ ______ _______ ______ _______ ______ _______ ______ _______ ______ _______ ______ _______ ______ _______ ______

ANSWER: a. b. c. d. e. f. g. h. i. j. k. l.

Inflow/ Outflow Activity − O − F − I + I − O + O − O − F − F + O + F +

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 5 min.

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Chapter 23—Statement of Cash Flows 88. (Appendix) Pro Line Communication Company's sales for the calendar year 20-B amounted to $825,000. The Accounts Receivable balance as of December 31, 20-A was $77,000. This same account had a balance of $62,000 as of December 31, 20-B. Required: Calculate the amount of cash received from customers in 20-B. Sales Add decrease in accounts receivable Cash received from customers in 20-B POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Applying NOTES: 5 min. ANSWER:

$825,000 15,000 $840,000

89. (Appendix) Northern Lights Company's cost of goods sold for the calendar year 20-B amounted to $540,000. The beginning and ending balances of Merchandise Inventory and Accounts Payable were as follows:

Merchandise Inventory Accounts Payable

Dec. 31, 20-B Dec. 31, 20-A $83,000 $79,000 33,000 30,000

Required: Compute the amount of cash paid for merchandise in 20-B. Cost of goods sold Add increase in merchandise inventory Cost of merchandise purchased Less increase in accounts payable Cash paid for merchandise in 20-B POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.110 - LO: 23-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Applying NOTES: 5 min. ANSWER:

$540,000 4,000 $544,000 (3,000 $541,000

90. (Appendix) Following is information for the Tri-County Carting Corporation for fiscal years 20-A and 20-B:

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Chapter 23—Statement of Cash Flows Tri-County Carting Corporation Comparative Balance Sheet December 31, 20-B and 20-A Assets 20-B Current assets: Cash Government notes Accrued interest receivable Accounts receivable (net) Merchandise inventory Supplies and prepayments Total current assets Property, plant, and equipment: Store equipment Less accumulated depreciation— store equipment Delivery equipment Less accumulated depreciation— delivery equipment Office equipment Less accumulated depreciation— office equipment Total property, plant, and equipment Total assets

20-A

Inc./Dec.

$ 58,240 $ 58,300 1,650 5,500 82 192 154,245 139,150 177,564 185,658 11,041 7,524 $402,822 $396,324

$ (60) (3,850) (110) 15,095 (8,094) 3,517 $ 6,498

$132,000 $106,700

$25,300

(49,500) 123,200

(38,500) 88,000

(11,000) 35,200

(34,375) 105,050

(22,000) 93,472

(12,375) 11,578

(22,000) (16,775) $254,375 $210,897 $657,197 $607,221

(5,225) $43,478 $49,976

$ 27,720 $ 32,450 89,416 128,550 2,722 4,180 231 220 $120,089 $165,400

$ (4,730) (39,134) (1,458) 11 $(45,311)

$275,000 $269,500

$ 5,500

110,000 107,250 152,108 65,071 $537,108 $441,821

2,750 87,037 $ 95,287

$657,197 $607,221

$ 49,976

Liabilities Current liabilities: Notes payable Accounts payable Accrued and withheld payroll taxes Accrued interest payable Total liabilities Stockholders' Equity Common stock (100,000 shares, $10 par) Paid-in capital in excess of par— common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity

Tri-County Carting Corporation Income Statement For the Year Ended December 31, 20-B Net sales Cost of goods sold Cengage Learning Testing, Powered by Cognero

$1,265,275 742,775 Page 47

Chapter 23—Statement of Cash Flows Gross profit Operating expenses Operating income Other revenues and expenses: Interest revenue Interest expense Net income

$ 522,500 398,063 $ 124,437 $ 550 (2,750)

Tri-County Carting Corporation Statement of Retained Earnings For the Year Ended December 31, 20-B Retained earnings, January 1 Net income $122,237 Less dividends (35,200) Net increase in retained earnings Retained earnings, December 31

(2,200) $ 122,237

$ 65,071

87,037 $152,108

Required: 1. Prepare a schedule for the calculation of cash generated from operating activities for the year ended December 31, 20-B. 2. Prepare a statement of cash flow for the year ended December 31, 20-B. ANSWER: Tri-County Carting Corporation Schedule for the Calculation of Cash Generated from Operating Activities For the Year Ended December 31, 20-B Income Cash Statement Additions Deductions Flows Net sales $1,265,275 15,095 $1,250,180 Cost of goods sold 742,775 39,134 8,094 773,815 Gross profit $ 522,500 $ 476,365 3,517 Operating expenses 398,063 1,458 28,600 374,438 Operating income $ 124,437 $ 101,927 Interest revenue 550 110 660 Interest expense (2,750) 11 (2,739 Net income $ 122,237 $ 99,848

Tri-County Carting Corporation Statement of Cash Flows For the Year Ended December 31, 20-B Cash flows from operating activities: Cash received from customers $1,250,180 Interest received 660 Cash provided by operating activities Cash paid for merchandise $ (773,815) Cash paid for operating expenses (374,438) Cengage Learning Testing, Powered by Cognero

$ 1,250,840

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Chapter 23—Statement of Cash Flows Interest paid Cash disbursed for operating activities Net cash provided by operating activities Cash flows from investing activities: Purchased store equipment Purchased delivery equipment Purchased office equipment Net cash used by investing activities Cash flows from financing activities: Issued common stock Retired notes payable Paid dividends Net cash used by financing activities Net decrease in cash and cash equivalents Cash and cash equivalents, January 1 Cash and cash equivalents, December 31 POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.110 - LO: 23-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Applying NOTES: 20 min.

(2,739) (1,150,992 $ 99,848 $ (25,300) (35,200) (11,578) (72,078) $ 8,250 (4,730) (35,200) (31,680 $ (3,910) 63,800 $ 59,890

91. (Appendix) Magic Wand, Inc.'s sales for the calendar year 20-B amounted to $745,000. The Accounts Receivable balance as of December 31, 20-A was $67,000. This same account had a balance of $79,000 as of December 31, 20B. Required: Calculate the amount of cash received from customers in 20-B. Sales Less increase in accounts receivable Cash received from customers in 20-B POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.110 - LO: 23-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Applying NOTES: 5 min. ANSWER:

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$745,000 12,000 $733,000

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Chapter 23—Statement of Cash Flows 92. (Appendix) Strathmore Company's cost of goods sold for the calendar year 20-B amounted to $412,000. The beginning and ending balances of Merchandise Inventory and Accounts Payable were as follows:

Merchandise Inventory Accounts Payable

Dec. 31, 20-B Dec. 31, 20-A $47,000 $42,000 36,000 29,000

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$412,000 5,000 $417,000 (7,000 $410,000

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Chapter 23—Statement of Cash Flows 93. (Appendix) The following activities took place at Austin Company during the most recent year. Indicate whether each activity is a cash inflow (+) or cash outflow (−) and whether it is an operating (O), investing (I), or financing (F) activity.

1. 2.

Inflow/ Outflow Activity _________ _______ ________________ ________________ ________________ ________________ _ ________ _______ ________________ ________________ ________________ ________________ ________________ ________________

ANSWER: 1. 2.

Payments to acquire investments in debt securities Dividends received on investments made in the stock of other corporations 3. Payments for the acquisition of inventory 4. Proceeds from issuance of stock 5. Payments for interest on loans 6. Interest received on loans made to outside entities 7. Repayment of the principal on loans 8. Payment to acquire productive assets 9. Proceeds from the sale of productive assets 10. Cash receipts from the sale of services 11. Payments of dividends to stockholders 12. Payments to suppliers and for other expenses POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 5 min.

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Inflow/ Outflow Activity – I + – + – + – – + + – –

O O F O O F I I O F O

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Chapter 23—Statement of Cash Flows 94. (Appendix) The following information is from the 20-B and 20-A financial statements for Bay Village Paving Company. Income statement data: Operating expenses for 20-B Depreciation expense

$194,500 11,000

Balance sheet data: Supplies and prepayments Accounts payable Accrued and withheld payroll taxes

20-B $ 7,900 22,320 1,800

20-A $ 4,800 20,160 2,300

Required: Compute the amount of cash paid for operating expenses in 20-B. Operating expenses for 20-B Less depreciation expense Add increase in supplies/prepayment Less increase in accounts payable Add decrease in accrued payroll taxes Amount of cash paid for operating expenses in 20-B POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Applying NOTES: 5 min. ANSWER:

$194,500 (11,000) 3,100 (2,160) 500 $184,940

95. Transactions and events associated with selling a product or providing a service are known as ____________________. They are related to the revenues and expenses reported on the income statement. ANSWER: operating activities POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 96. ____________________ and ____________________ are investing and financing activities that involve no cash flows, but represent a significant change in the company's financial position. ANSWER:

Noncash investing, financing activities Financing activities, noncash investing POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.112 - LO: 23-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 97. The ____________________ is the method of reporting cash from operating activities in which net income is adjusted for transactions that affect both net income and cash from operating activities, but in different ways. ANSWER: indirect method POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 98. Transactions involving the purchase and sale of long-term assets, investments in debt and equity securities, and lending money and collecting the principal on the related items are known as ____________________. ANSWER: investing activities POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 99. ____________________ are transactions involving the exchange of cash between the company and its owners (stockholders) and creditors. ANSWER: Financing activities POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 100. The ____________________ is a financial statement associated with the operating, investing, and financing activities of a company. ANSWER: statement of cash flows POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 101. The ____________________ is the method of preparing the statement of cash flows where the revenues and expenses reported on the income statement are adjusted to reflect the amount of cash received or paid for each item. ANSWER: direct method POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 23—Statement of Cash Flows 102. Short-term, highly liquid investments that are considered the same as cash when preparing the statement of cash flows are known as ____________________. ANSWER: cash equivalents POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.112 - LO: 23-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 103. The statement of cash flows categorizes all cash flow into three major types of activities, namely ____________________, ____________________, and ____________________. ANSWER:

operating, investing, financing activities operating, financing activities, investing investing, operating, financing activities investing, financing activities, operating financing activities, operating, investing financing activities, investing, operating POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.108 - LO: 23-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 104. Under the ____________________, net income is reported first on the statement of cash flows as the primary source of cash from operating activities. ANSWER: indirect method POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.111 - LO: 23-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 23—Statement of Cash Flows Match the terms with the definitions. a. cash equivalents b. direct method c. financing activities d. indirect method e. investing activities f. noncash investing and financing activities g. operating activities h. statement of cash flows DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.108 - LO: 23-2 COLL.HEIN.17.111 - LO: 23-4 COLL.HEIN.17.112 - LO: 23-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-24-Statement of Cash Flows KEYWORDS: Bloom's: Remembering NOTES: 1 min. 105. Transactions dealing with the exchange of cash between the company and its owners (stockholders) and creditors. ANSWER: c POINTS: 1 106. A financial statement associated with the operating, investing, and financing activities of a company. ANSWER: h POINTS: 1 107. Transactions involving the purchase and sale of long-term assets, investments in debt and equity securities, and lending money and collecting the principal on the related items. ANSWER: e POINTS: 1 108. Transactions and events associated with selling a product or providing a service. They are related to the revenues and expenses reported on the income statement. ANSWER: g POINTS: 1 109. Investing and financing activities that involve no cash flows, but represent a significant change in the company's financial position. ANSWER: f POINTS: 1

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Chapter 23—Statement of Cash Flows 110. A method of preparing the statement of cash flows in which the revenues and expenses reported on the income statement are adjusted to reflect the amount of cash received or paid for each item. ANSWER: b POINTS: 1 111. Short-term, highly liquid investments that are considered the same as cash when preparing the statement of cash flows. ANSWER: a POINTS: 1 112. A method of reporting cash from operating activities in which net income is adjusted for transactions that affect both net income and cash from operating activities but in different ways. ANSWER: d POINTS: 1

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Chapter 24—Analysis of Financial Statements 1. Quick assets include cash, temporary investments, and receivables. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. As a general rule, a current ratio of 0.5 to 1 or better is satisfactory. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. The current ratio and the quick or acid-test ratio may be too high for the overall good of the business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 24—Analysis of Financial Statements 4. Merchandise inventory turnover measures the relationship between sales and inventory. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. In calculating the percentage of change (for a comparative financial statement), the amount for the year prior serves as the base. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. Issuing additional common stock is not a desirable means to finance business growth. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 24—Analysis of Financial Statements 7. When there are preferred shares outstanding, the calculation of book value per share of common stock must first take into consideration the claims or equity of the preferred stock. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. From the standpoint of the individual stockholder, one of the most important measures of profitability of the firm is the earnings per share. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 9. Leverage measures are intended to indicate the extent to which a firm is being financed by debt and the ability of the firm to meet its debt obligations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.116 - LO: 24-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 10. Asset turnover ratio measures how effectively a company uses assets to generate sales. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 11. The debt-to-equity ratio is calculated by dividing the net income for the year by the average stockholders' equity for the year. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.116 - LO: 24-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. Retention of a major portion of business earnings is a desirable way to finance corporate growth. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 13. Working capital is the excess of a company's current assets over current liabilities. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 24—Analysis of Financial Statements 14. The current ratio is calculated by dividing total current assets by total liabilities. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. The quick or acid-test ratio is calculated by dividing current assets by current liabilities. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 16. Vertical analysis of income statements automatically provides the cost of goods sold ratio and the gross profit ratio. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 24—Analysis of Financial Statements 17. Profitability measures focus on relationships between key income statement and balance sheet accounts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. Profitability measures are intended to indicate the extent to which an entity is being financed by debt and the ability of the entity to meet its debt obligations. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 19. Book value per share of common stock is the measure of ownership equity represented by each share. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 24—Analysis of Financial Statements 20. The return on total assets is calculated by dividing the net income for the year by the average total assets during the year. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. If a corporation has only common stock outstanding, book value per share can be determined by dividing the total stockholders' equity by the number of shares outstanding at the end of the year. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 22. Vertical analysis reports the amount of each item in a statement as a percentage of a designated total. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. Information not reported in the financial statements is also important in evaluating the financial health of a firm. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.117 - LO: 24-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. The accounts receivable turnover measures how promptly receivables are collected. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 24—Analysis of Financial Statements 25. Merchandise inventory turnover is calculated by dividing cost of goods sold by the average merchandise inventory. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. The debt-to-equity ratio measures the extent of leverage, or proportion of borrowed capital, with which a business operates. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. The gross profit ratio is computed by subtracting cost of goods sold from net sales and dividing by net sales. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 24—Analysis of Financial Statements 28. A period of two consecutive years is sufficient to establish a long-term trend. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.117 - LO: 24-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. Liquidity measures are intended to indicate an entity's ability to pay long-term debts as they come due. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 30. The ratio of liabilities to stockholders' equity is a measure of the extent of leverage, or proportion of borrowed capital, with which a business operates. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.116 - LO: 24-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 31. The ratio of earnings before interest and taxes to the interest requirement is called the times interest earned ratio. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.116 - LO: 24-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. The times interest earned ratio tells a creditor the firm's ability to pay interest on debt. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.116 - LO: 24-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 24—Analysis of Financial Statements 33. The various methods of financial statement analysis need to be used cautiously, with an awareness of the limitations of accounting data. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.117 - LO: 24-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 34. Comparisons across companies are difficult due to the possible use of different accounting techniques. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.117 - LO: 24-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 35. Accounts receivable turnover is calculated by dividing (gross) sales by the average (gross) amount of accounts receivable. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. The financial statements of a business are intended to supply information to several interested parties such as: management, present and potential owners, creditors, employees and their unions, governmental agencies, and sometimes the general public. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 37. A comparison of the amounts for the same item in the financial statements of two or more periods is called horizontal analysis. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. An expression of the amount of each item in a statement as a percentage of some designated total for comparative purposes is called vertical analysis. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 39. The cause of changes in key ratios must be investigated before drawing conclusions. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.117 - LO: 24-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 40. Profitability measures are intended to indicate an entity's ability to earn income by operating efficiently. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 41. A comparison of the amounts for the same item in financial statements of two or more periods is called a. vertical analysis. b. competitive analysis. c. earnings per share. d. horizontal analysis. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 42. Leverage is a. the ability to earn a satisfactory return on the investments in the business. b. the proportion of debt to stockholders' equity. c. the ability to pay current debts when they come due. d. also called profit margin. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 43. An expression of the amount of each item in a statement as a percentage of some designated total for comparative purposes is called a. vertical analysis. b. return on total assets. c. earnings per share. d. horizontal analysis. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 44. The net sales for a company were $3,600,000; gross profit was $600,000; and net income was $260,000. The net income to net sales ratio would be a. 7.22%. b. 16.67%. c. 23.89%. d. 43.33%. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 45. A company has cash, $85,000; temporary investments, $30,000; net receivables, $60,000; and inventory, $350,000. Current liabilities are $300,000. The current ratio is a. 0.58 to 1. b. 0.74 to 1. c. 1.75 to 1. d. 1.86 to 1. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 1 min. 46. A company has net sales on account of $1,750,000. Net accounts receivable at the beginning of the year are $147,000 and net accounts receivable at the end of the year are $153,000. The accounts receivable turnover is a. 11.9. b. 11.7. c. 11.4. d. 1.0. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 47. Dividing quick assets by total current liabilities is the calculation for the a. current ratio. b. return on investment. c. quick or acid-test ratio. d. ratio of liabilities to owner's equity. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 0 min. 48. Dividing net sales on account by the average amount of net accounts receivable is the calculation for the a. accounts receivable turnover. b. working capital turnover. c. merchandise inventory turnover. d. plant and equipment turnover. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 49. Merchandise inventory turnover measures the relationship between a. assets and current liabilities. b. merchandise inventory and current liabilities. c. expenses and merchandise inventory. d. cost of goods sold and merchandise inventory. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 50. Dividing the total stockholders' equity by the average number of shares outstanding at the end of the year (if only common stock is outstanding) is the calculation for a. book value per share. b. earnings per share. c. return on equity. d. the times interest earned ratio. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 51. The net income for the year ended was $720,000; total assets at the beginning of the year was $2,100,000; and total assets at the end of the was $2,300,000. The return on total assets would be a. 1.1%. b. 3.1%. c. 11.2%. d. 32.7%. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 1 min. 52. A company has cash, $80,000; temporary investments, $20,000; net receivables, $60,000; and inventory, $450,000. Current liabilities are $200,000. The quick or acid-test ratio is a. 0.54 to 1. b. 0.80 to 1. c. 2.25 to 1. d. 3.05 to 1. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 53. A company has net sales on account of $1,200,000. Net accounts receivable at the beginning of the year are $500,000 and net accounts receivable at the end of the year are $700,000. The average number of days that the accounts receivables were on the books was a. 8.7 days. b. 182.5 days. c. 304.0 days. d. 439.8 days. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 1 min. 54. The cost of goods sold for a company for the year was $1,900,000. Merchandise inventory at the beginning of the year was $125,000 and merchandise inventory at the end of the year was $133,000. The merchandise inventory turnover for the year was a. 0.1. b. 14.7. c. 33.8. d. 65.5. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 55. The cost of goods sold for a company for the year was $1,600,000. Merchandise inventory at the beginning of the year was $195,000 and merchandise inventory at the end of the year was $205,000. The average number of days that the inventory was held during the year was a. 8.0 days. b. 25.0 days. c. 39.6 days. d. 45.6 days. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 1 min. 56. The net income of a company is $175,000. The average book value of the company's assets is $1,300,000. The return on total assets would be a. 20.00%. b. 7.43%. c. 600.00%. d. 13.46%. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 57. The liabilities of a company at the end of the year are $500,000 and the total stockholders' equity at the end of the year is $1,500,000. The ratio of liabilities to stockholders' equity is a. 0.50 to 1. b. 0.33 to 1. c. 0.67 to 1. d. 3 to 1. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.116 - LO: 24-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 1 min. 58. Total liabilities divided by total stockholders' equity is the calculation for the a. current ratio. b. ratio of liabilities to stockholders' equity. c. return on equity ratio. d. times interest earned ratio. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.116 - LO: 24-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 59. Dividing cost of goods sold by the average of merchandise inventory is the calculation for the a. accounts receivable turnover. b. working capital turnover. c. merchandise inventory turnover. d. plant and equipment turnover. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 60. Dividing the net income for the year by the average assets for the year is the calculation for the a. return on assets. b. earnings per share. c. book value per share. d. quick or acid-test ratio. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 61. Dividing quick assets by current liabilities is the calculation for the a. current ratio. b. return on investment. c. acid-test ratio. d. ratio of liabilities to stockholders' equity. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 62. The net income for a company was $315,000 last year and is $270,000 this year. The percent of increase or decrease was a. 16.7%. b. 14.3%. c. 26.4%. d. 86.0%. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 63. Dividing the net income for the year by the average number of common shares outstanding during the year (if only common stock is outstanding) is the calculation for the a. return on stockholders' equity. b. return on assets. c. earnings per share. d. book value per share. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 64. The net income for the year ended was $300,000. Common stockholders' equity at the beginning of the year was $1,400,000 and $1,600,000 at the end of the year. The return on common stockholders' equity would be a. 18.75%. b. 20.00%. c. 21.43%. d. 87.50%. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 65. A corporation has 2,000 shares of $50 par, 10% preferred stock, and 6,000 shares of common stock outstanding. The net income for the year is $250,000. The earnings per share of common stock would be a. $10.83. b. $31.25. c. $40.00. d. $41.67. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 1 min. 66. Net income divided by average common stockholders' equity is the calculation for the a. ratio of net sales to assets. b. return on total assets. c. return on common stockholders' equity. d. earnings per share. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 67. A company has 6,000 shares of common stock outstanding and the total common stockholders' equity is $1,500,000. The book value per share of common stock is a. $.004. b. $2.50. c. $4.00. d. $250.00. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 1 min. 68. The net income of a company for the year just ended is $230,000. Income tax is $80,500 and interest expense is $20,000. The number of times interest was earned would be a. 0.05. b. 10.5. c. 11.5. d. 16.5. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.116 - LO: 24-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 69. Book value per share of common stock is calculated by dividing the a. number of common shares outstanding at year end by the common stockholders' equity. b. net income available to common stockholders by the average number of common shares outstanding. c. common stockholders' equity by the number of common shares outstanding at year end. d. total liabilities by the total stockholders' equity. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 70. Indicate whether the following are a measure of (a) liquidity, (b) profitability, or (c) leverage. 1. Quick ratio 2. Times interest earned ratio 3. Current ratio 4. Ratio of net sales to assets 5. Return on total assets 6. Accounts receivable turnover 7. Return on stockholders' equity 8. Book value per share of common stock 9. Ratio of liabilities to stockholders' equity 10. Acid-test ratio 11. Earnings per share of common stock 12. Merchandise inventory turnover 13. Working capital 1. a 2. c 3. a 4. b 5. b 6. a 7. b 8. b 9. c 10. a 11. b 12. a 13. a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 4 min. ANSWER:

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Chapter 24—Analysis of Financial Statements 71. A corporation is engaged in the transactions listed in the first column. For the measure placed next to each transaction, indicate the effect (increase, decrease, or no effect) the transaction has on the measure.

1. 2. 3. 4. 5. 6.

Transaction Stock dividend issued Purchased marketable securities Borrowed cash by issuing notes payable Paid cash dividends Paid salary expense Sold merchandise on account

Method Earnings per share Working capital Ratio of liabilities to stockholders' equity Current ratio Merchandise inventory turnover Quick ratio

1. decrease 2. no effect 3. increase 4. decrease 5. no effect 6. increase POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 5 min. ANSWER:

72. Use the following comparative income statements and balance sheets to complete the required ratio analysis. Comparative Income Statement For the Years Ended December 31, 20-C and 20-B 20-C Net sales $965,400 Cost of goods sold 515,100 Gross profit $450,300 Operating expenses: Selling expenses $142,000 Administrative expenses 150,200 Interest expense 29,300 Total operating expenses $321,500 Income tax expense 45,500 Total expenses $367,000 Net income $ 83,300

Comparative Balance Sheets December 31, 20-C and 20-B Assets Cengage Learning Testing, Powered by Cognero

20-C

20-B $1,028,600 590,300 $ 438,300 $ 173,400 182,400 34,100 $ 389,900 18,200 $ 408,100 $ 30,200

20-B Page 33

Chapter 24—Analysis of Financial Statements Cash Accounts receivable (net) Merchandise inventory Property, plant, and equipment (net) Total assets

$ 45,100 59,800 150,900 710,500 $966,300

$ 48,500 101,500 171,600 808,800 $1,130,400

Liabilities and Stockholders' Equity Accounts payable Notes payable (due 6/30/-D) Bonds payable (45% due each June) Common stock, $10 par value Retained earnings Total liabilities and stockholders' equity

$108,200 70,000 154,000 420,000 214,100 $966,300

$ 151,600 70,000 280,000 420,000 208,800 $1,130,400

Additional information: All sales are made on account. Balances of selected accounts for December 31, 20-A are accounts receivable (net), $73,800; merchandise inventory, $153,100; total assets, $906,900; common stockholders' equity, $527,200; and common shares outstanding, 42,000. 20-C 42,000 $44,400

Number of common shares Dividends paid

20-B 42,000 $49,000

Required: Prepare a liquidity analysis by calculating for 20-B and 20-C the (a) current ratio, (b) quick ratio, (c) accounts receivable turnover, and (d) merchandise inventory turnover. Indicate whether there has been an improvement or not from 20-B to 20-C. Round all answers to two decimal places.

a. Current ratio b. Quick ratio c. Accounts receivable turnover and average collection period d. Merchandise inventory turnover and average number of days to sell ANSWER:

20-C ____ ____

20-B Improvement? ____ Yes or No ____ Yes or No

____

Yes or No

____

Yes or No

a. Current ratio 20-C (worse) ($45,100 + $59,800 + $150,900) ÷ ($108,200 + $70,000 + $69,300) = 1.03 to 1 Current ratio 20-B ($48,500 + $101,500 + $171,600) ÷ ($151,600 + $126,000) = 1.16 to 1 b. Quick ratio 20-C (worse) ($45,100 + $59,800) ÷ ($108,200 + $70,000 + $69,300) = 0.42 to 1 Quick ratio 20-B ($48,500 + $101,500) ÷ ($151,600 + $126,000) = 0.54 to 1 c.

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Chapter 24—Analysis of Financial Statements Accounts receivable turnover 20-C (situation improved) $965,400 ÷ [($59,800 + $101,500) ÷ 2] = 11.97 times per year 365 ÷ 11.97 = 30.49 days Accounts receivable turnover 20-B $1,028,600 ÷ [($101,500 + $73,800) ÷ 2] = 11.74 times per year 365 ÷ 11.74 = 31.09 days d. Merchandise inventory turnover 20-C (merchandise inventory turnover decreased) $515,100 ÷ [($150,900 + $171,600) ÷ 2] = 3.19 times 365 ÷ 3.19 = 114.42 days Merchandise inventory turnover 20-B $590,300 ÷ [($171,600 + $153,100) ÷ 2] = 3.64 times 365 ÷ 3.64 = 100.27 days POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 20 min.

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Chapter 24—Analysis of Financial Statements 73. Perform a vertical analysis of the following comparative income statements for Cheng Corporation. Use net sales as the comparative base. Cheng Corporation Comparative Income Statement For the Years Ended December 31, 20-B and 20-A 20-B 20-A Net sales $1,308,640 _____% $1,399,352 _____% Cost of goods sold 708,030 _____% 757,667 _____% Gross profit $ 600,610 _____% $ 641,685 _____% Operating expenses 435,307 _____% 480,191 _____% Operating income $ 165,303 _____% $ 161,494 _____% Other revenues and expenses (19,551) _____% (19,132) _____% Income before income taxes $ 145,752 _____% $ 142,362 _____% Income tax expense (11,047) _____% (10,712) _____% Net income $ 134,705 _____% $ 131,650 _____% ANSWER: Cheng Corporation Comparative Income Statement For the Years Ended December 31, 20-B and 20-A 20-B 20-A Net sales $1,308,640 100.00% $1,399,352 100.00% Cost of goods sold 708,030 54.10 % 757,667 54.14 Gross profit $ 600,610 45.90 % $ 641,685 45.86 % Operating expenses 435,307 33.26 % 480,191 34.32 Operating income $ 165,303 12.63 % $ 161,494 11.54 % Other revenues and expenses (19,551) (1.49)% (19,132) (1.37)% Income before income taxes $ 145,752 11.14 % $ 142,362 10.17 % Income tax expense (11,047) (0.84)% (10,712) (0.77)% Net income $ 134,705 10.29 % $ 131,650 9.4 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 5 min. 74. Use the following comparative income statements and balance sheets to complete the required ratio analysis: Comparative Income Statement For the Years Ended December 31, 20-C and 20-B 20-C Net sales $965,400 Cost of goods sold 515,100 Cengage Learning Testing, Powered by Cognero

20-B $1,028,600 590,300 Page 36

Chapter 24—Analysis of Financial Statements Gross profit Operating expenses: Selling expenses Administrative expenses Interest expense Total operating expenses Income tax expense Total expenses Net income

$450,300

$ 438,300

$136,000 150,200 35,400 $321,600 45,500 $367,100 $ 83,200

$ 169,100 182,400 39,100 $ 390,600 18,200 $ 408,800 $ 29,500

Cash Accounts receivable (net) Merchandise inventory Property, plant, and equipment (net) Total assets

20-C $ 50,100 59,800 150,900 718,500 $979,300

20-B $ 52,500 101,500 171,600 813,800 $1,139,400

Liabilities and Stockholders' Equity Notes payable (due 6/30/-D) Accounts payable Bonds payable Common stock, $10 par value Retained earnings Total liabilities and stockholders' equity

$ 70,000 113,200 162,000 420,000 214,100 $979,300

Comparative Balance Sheets December 31, 20-C and 20-B Assets

70,000 155,600 285,000 420,000 208,800 $1,139,400

Additional information: All sales are made on account. Balances of selected accounts for December 31, 20-A are accounts receivable (net), $73,800; merchandise inventory, $139,200; total assets, $906,900; common stockholders' equity, $527,200; and common shares outstanding, 42,000. 20-C 42,000 $44,400

Number of common shares Dividends paid

20-B 42,000 $49,000

Required: Analyze for 20-B and 20-C the extent to which this corporation is being financed by debt using the (a) ratio of liabilities to stockholders' equity, and analyze its ability to meet its debt obligation using the (b) times interest earned ratio. Indicate whether there has been an improvement or not from 20-B to 20-C. Round all answers to two decimal places. 20-C 20-B Improvement? a. Ratio of liabilities to stockholders' equity _____ _____ Yes or No b. Times interest earned ratio _____ _____ Yes or No ANSWER:

a. Ratio of liabilities to stockholders' equity 20-C (situation improved) ($70,000 + $113,200 + $162,000) ÷ ($420,000 + $214,100) = 0.54 to 1 Ratio of liabilities to stockholders' equity 20-B

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Chapter 24—Analysis of Financial Statements ($70,000 + $155,600 + $285,000) ÷ ($420,000 + $208,800) = 0.81 to 1 b. Times interest earned ratio 20-C (situation improved) ($83,200 + $45,500 + $35,400) ÷ $35,400 = 4.64 times Times interest earned ratio 20-B ($29,500 + $18,200 + $39,100) ÷ $39,100 = 2.22 times POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.116 - LO: 24-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 10 min. 75. Consider the following: Santos Tier I Center

Balance Sheet December 31, 20-Assets Current assets: Cash Accounts receivable Merch. inventory Supplies Prepaid insurance Total current assets Equipment: Furniture and fixtures Less accum. depr.

Liabilities $13,125 18,450 55,950 2,250 1,575

$21,000

Current liabilities: Accounts payable $10,500 Sales tax payable 825 Wages payable 300 Total current liab. Noncurrent liab.: $ 91,350 Mortgage payable Total liabilities Stockholders' Equity Common stock

(6,000)

Total equipment Total assets

13,650 $ 25,275 40,000

15,000 Retained earnings Total liabilities and $106,350 stockholders' equity

Additional information: Total stockholders' equity, January 1, 20-Accounts receivable, January 1, 20-Net income for 20-Merchandise inventory, January 1, 20-Net credit sales for 20--

$ 11,625

41,075 $106,350

$ 71,250 19,650 21,600 60,750 105,000

Required: You have been provided with the balance sheet for Santos Tier I Center. Calculate the following ratios and round answers to two decimal places. Cengage Learning Testing, Powered by Cognero

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Chapter 24—Analysis of Financial Statements a. Current ratio for 20-b. Return on stockholders' equity for 20-c. Accounts receivable turnover and average number of days the receivables were on the books for 20-d. Ratio of liabilities to stockholders' equity for 20-ANSWER:

_____ to 1 _____% _____ times _____ days _____ to 1

a. $91,350 ÷ $11,625 = 7.86 to 1 b. ($71,250 + $81,075) ÷2 = $76,163 $21,600 ÷ $76,163 = 28.36% c. ($18,450 + $19,650) ÷ 2 = $19,050 $105,000 ÷ $19,050 = 5.51 times per year 365 ÷ 5.51 = 66.24 days d. $25,275 ÷ $81,075 = 0.31 to 1

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Moderate COLL.HEIN.17.113 - LO: 24-2 COLL.HEIN.17.115 - LO: 24-3 COLL.HEIN.17.116 - LO: 24-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 5 min.

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Chapter 24—Analysis of Financial Statements 76. Consider the following:

O'Farrell and O'Brien Corporation Comparative Income Statement For the Years Ended December 31, 20-B and 20-A 20-B 20-A Net sales $660,000 _______% $720,000 _______% Cost of goods sold 298,000 _______% 390,000 _______% Gross profit $362,000 _______% $330,000 _______% Operating expenses 244,000 _______% 257,000 _______% $ Operating income $118,000 _______% _______% 73,000 Other revenues and expenses (8,500) _______% (8,650) _______% $ Income before income tax $109,500 _______% _______% 64,350 Income tax expense 17,300 _______% 14,740 _______% Net income $ 92,200 _______% $ 49,61 _______% Required: Prepare a vertical comparative income statement basing percentages on net sales for each year. ANSWER: O'Farrell and O'Brien Corporation

Comparative Income Statement For the Years Ended December 31, 20-B and 20-A 20-B 20-A Net sales $660,000 100.00% $720,000 100.00% Cost of goods sold 298,000 45.15 % 390,000 54.17 Gross profit $362,000 54.85 % $330,000 45.83 % Operating expenses 244,000 36.97 % 257,000 35.69 Operating income $118,000 17.88 % $ 73,000 10.14 % Other revenues and expenses (8,500) (1.29)% (8,650) (1.20)% Income before income tax $109,500 16.59 % $ 64,350 8.94 % Income tax expense 17,300 2.62 % 14,740 2.05 Net income $ 92,200 13.97 % $ 49,610 6.89 POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 5 min.

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Chapter 24—Analysis of Financial Statements 77. Consider the following: Roma Tile Corporation Comparative Income Statement For the Years Ended December 31, 20-B and 20-A 20-B Net sales $660,000 Cost of goods sold 354,000 Gross profit $306,000 Operating expenses 230,000 Operating income $ 76,000 Other revenues and expenses (7,300) Income before income tax $ 68,700 Income tax expense 16,940 Net income $ 51,760

20-A $720,000 390,000 $330,000 243,000 $ 87,000 (7,750) $ 79,250 18,170 $ 61,080

Required: Prepare a horizontal comparative income statement. ANSWER: Roma Tile Corporation Comparative Income Statement For the Years Ended December 31, 20-B and 20-A 20-B 20-A Inc./Dec.Percentage Net sales $660,000 $720,000 $(60,000) (8.33%) Cost of goods sold 354,000 390,000 (36,000) (9.23%) Gross profit $306,000 $330,000 $(24,000) (7.27%) Operating expenses 230,000 243,000 (13,000) (5.35%) Operating income $ 76,000 $ 87,000 $(11,000) (12.64%) Other revenues and expenses (7,300) (7,750) (450) (5.81%) Income before income tax $ 68,700 $ 79,250 $(10,550) (13.31%) Income tax expense 16,940 18,170 (1,230) (6.77%) Net income $ 51,760 $ 61,080 $ (9,320) (15.26%) POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 5 min. 78. Use the comparative income statements and balance sheets below to complete the required ratio analysis. Comparative Income Statement For the Years Ended December 31, 20-C and 20-B 20-C Cengage Learning Testing, Powered by Cognero

20-B Page 41

Chapter 24—Analysis of Financial Statements Net sales Cost of goods sold Gross profit Operating expenses: Selling expenses Administrative expenses Interest expenses Total operating expenses Income tax expenses Total expenses Net income

$965,400 515,100 $450,300

$1,028,600 590,300 $ 438,300

$136,000 150,200 26,000 $312,200 45,500 $357,700 $ 92,600

$ 169,100 182,400 32,500 $ 384,000 18,200 $ 402,200 $ 36,100

Cash Accounts receivable (net) Merchandise inventory Property, plant, and equipment Total assets

20-C $ 38,100 59,800 150,900 710,500 $959,300

20-B $ 43,500 101,500 171,600 808,800 $1,125,400

Liabilities and Stockholders' Equity Notes payable (due June 30, 20-D) Accounts payable Bonds payable Common stock, $10 par value Retained earnings Total liabilities and stockholders' equity

$ 70,000 101,200 154,000 420,000 214,100 $959,300

$ 70,000 146,600 280,000 420,000 208,800 $1,125,400

Comparative Balance Sheet December 31, 20-C and 20-B Assets

Number of common shares Dividends paid

20-C 42,000 $44,400

20-B 42,000 $49,000

Prepare a profitability analysis by calculating for 20-B and 20-C the (a) net sales to assets, (b) return on total assets, (c) return on common stockholders' equity, (d) earnings per share, and (e) book value per share. Indicate whether there has been an improvement or not from 20-B to 20-C. Round to two decimal places.

a. Net sales to assets b. Return on total assets c. Return on common stockholders' equity d. Earnings per share e. Book value per share Cengage Learning Testing, Powered by Cognero

20-C 20-B Improvement? ______ ______ Yes or No ______ ______ Yes or No ______ ______ Yes or No ______ ______ Yes or No ______ ______ Yes or No Page 42

Chapter 24—Analysis of Financial Statements ANSWER:

a. Net sales to assets 20-C (slightly worse) $965,400 ÷ [($959,300 + $1,125,400) ÷ 2] = 0.93 to 1 Net sales to assets 20-B $1,028,600 ÷ [($1,125,400 + $906,900) ÷ 2] = 1.01 to 1 b. Return on total assets 20-C (significant improvement) $92,600 ÷ [($959,300 + $1,125,400) ÷ 2] = 8.88% Return on total assets 20-B $36,100 ÷ [($1,125,400 + $906,900) ÷ 2] = 3.55% c. Return on common stockholders' equity 20-C (significant improvement) $92,600 ÷ [($634,100 + $628,800) ÷ 2] = 14.66% Return on common stockholders' equity 20-B $36,100 ÷ [($628,800 + $527,200) ÷ 2] = 6.25% d. Earnings per share 20-C (significant improvement) $92,600 ÷ 42,000 shares = $2.20 per share Earnings per share 20-B $36,100 ÷ 42,000 shares = $0.86 per share e. Book value per share 20-C (slight improvement) ($420,000 + $214,100) ÷ 42,000 shares = $15.10 per share Book value per share 20-B ($420,000 + $208,800) ÷ 42,000 shares = $14.97 per share

POINTS: DIFFICULTY: LEARNING OBJECTIVES:

1 Challenging COLL.HEIN.17.113 - LO: 24-2 COLL.HEIN.17.115 - LO: 24-3 COLL.HEIN.17.116 - LO: 24-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Applying NOTES: 20 min.

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Chapter 24—Analysis of Financial Statements 79. The ratio of net sales on account to the average amount of net accounts receivable is known as the ____________________. ANSWER: accounts receivable turnover POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 80. ____________________ is the ratio of net income available to common stockholders for the year to the average common stockholders' equity during the year. ANSWER: Return on common stockholders' equity POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 81. The ratio of total liabilities to total stockholders' equity is also known as the ____________________. ANSWER: debt-to-equity ratio POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.116 - LO: 24-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 82. The net income ratio is the ratio of net income to ____________________. ANSWER: net sales POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 83. The excess of a company's current assets over current liabilities is called ____________________. ANSWER: working capital POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 84. ____________________ is reporting the amount of each item in a statement as a percentage of some designated total. ANSWER: Vertical analysis POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 85. The ratio of cost of goods sold to the average merchandise inventory is called the ____________________. ANSWER: merchandise inventory turnover POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 86. The ratio of quick assets to current liabilities is called the ____________________ or ____________________. ANSWER:

quick ratio, acid-test ratio acid-test ratio, quick ratio POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 87. ____________________ measures how promptly receivables are collected. ANSWER: Account receivable turnover POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 88. The ratio of common stockholders' equity to the number of common shares outstanding at the end of the year is known as ____________________. ANSWER: book value per share POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 89. As a general rule of thumb, the average number of days that receivables are on the books should not be greater than ____________________ the regular length of the credit period. ANSWER:

1 1/2 times 1.5 times POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 90. The ratio of net income available to common stockholders to the average number of shares of common stock outstanding during the year is the ____________________. ANSWER: earnings per share POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 91. The ____________________ is the ratio of operating expenses to net sales. ANSWER: operating expense ratio POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 92. The ____________________ is the ratio of earnings before interest and taxes to interest expense. ANSWER: times interest earned ratio POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.116 - LO: 24-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 93. Profitability measures focus primarily on the relationship between key ____________________ accounts. ANSWER: income statement and balance sheet POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 94. A comparison of the amounts for the same item in the financial statements of two or more periods is called ____________________. ANSWER: horizontal analysis POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 95. ____________________ indicate a company's ability to meet its current debts as they come due. ANSWER: Liquidity measures POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 96. The ratio of current assets to current liabilities is called the ____________________ or ____________________. ANSWER:

current ratio, working capital ratio working capital ratio, current ratio POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 97. A measure of how efficiently a company used its assets to generate sales is the ____________________, also called the ____________________. ANSWER:

ratio of net sales to assets, asset turnover ratio asset turnover ratio, ratio of net sales to assets POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.113 - LO: 24-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 98. The ____________________ measures how efficiently a company used its assets to generate sales. ANSWER: asset turnover ratio POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 99. The ____________________ is a measure of the extent of overall leverage or proportion of borrowed capital with which a business operates. It is also called debt-to-equity ratio. ANSWER: ratio of liabilities to stockholders' equity POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.116 - LO: 24-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 100. The ratio of net income for the year to the average assets for the year is called the ____________________. ANSWER: return on total assets POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.116 - LO: 24-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 101. One of the most important measures of profitability of the company is ____________________. ANSWER: earnings per share of common stock POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.115 - LO: 24-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 102. ____________________ measures indicate the extent to which a company is being financed by debt and the ability of the company to meet its debt obligations. ANSWER: Leverage POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.116 - LO: 24-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 103. The ratio of gross profit to sales is known as the ____________________. ANSWER: gross profit ratio POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 104. The ratio of net income to sales is known as the ____________________ or ____________________ ratio. ANSWER:

net income, profit margin profit margin, net income POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.114 - LO: 24-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. accounts receivable turnover b. book value per share c. working capital d. current ratio (working capital ratio) e. earnings per share f. gross profit ratio g. vertical analysis h. times interest earned ratio i. leverage measures j. return on common stockholders' equity k. quick ratio (acid-test ratio) l. profitability m. operating expense ratio DIFFICULTY: LEARNING OBJECTIVES: Cengage Learning Testing, Powered by Cognero

Easy COLL.HEIN.17.113 - LO: 24-2 COLL.HEIN.17.114 - LO: 24-1 Page 52

Chapter 24—Analysis of Financial Statements COLL.HEIN.17.115 - LO: 24-3 COLL.HEIN.17.116 - LO: 24-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min. 105. The ratio of current assets to current liabilities. ANSWER: d POINTS: 1 106. The ratio of common stockholders' equity to the number of common shares outstanding at the end of the year. ANSWER: b POINTS: 1 107. The ratio of gross profit to net sales. ANSWER: f POINTS: 1 108. The excess of a company's current assets over current liabilities. ANSWER: c POINTS: 1 109. The ability to earn a satisfactory return on the investments in the business. ANSWER: l POINTS: 1 110. The ratio of quick assets to current liabilities. ANSWER: k POINTS: 1 111. The ratio of net income available to common stockholders for the year to the average common stockholders' equity during the year. ANSWER: j POINTS: 1 112. The ratio of earnings before interest and taxes to interest expense. ANSWER: h POINTS: 1 113. The ratio of net income available to common stockholders to the average number of shares of common stock outstanding during the year. ANSWER: e POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Chapter 24—Analysis of Financial Statements 114. Measures that indicate the extent to which a company is being financed by debt and the ability of the company to meet its debt obligations. ANSWER: i POINTS: 1 115. The ratio of net sales on account to the average amount of net accounts receivable. ANSWER: a POINTS: 1 116. Reporting the amount of each item in a statement as a percentage of some designated total. ANSWER: g POINTS: 1 117. The ratio of operating expenses to net sales. ANSWER: m POINTS: 1 Match the terms with the definitions. a. profitability measures b. operating income ratio c. cost of goods sold ratio d. ratio of liabilities to stockholders' equity e. return on total assets f. ratio of net sales to assets g. horizontal analysis h. leverage i. net income ratio j. liquidity k. liquidity measures l. merchandise inventory turnover DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.113 - LO: 24-2 COLL.HEIN.17.114 - LO: 24-1 COLL.HEIN.17.115 - LO: 24-3 COLL.HEIN.17.116 - LO: 24-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-23-Financial Statement Analysis KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 24—Analysis of Financial Statements 118. The ratio of cost of goods sold to the average merchandise inventory. ANSWER: l POINTS: 1 119. It is a measure of the extent of overall leverage or proportion of borrowed capital with which a business operates. ANSWER: d POINTS: 1 120. The ratio of net income for the year to the average assets for the year. ANSWER: e POINTS: 1 121. The proportion of debt to stockholders' equity. ANSWER: h POINTS: 1 122. Measures that indicate a company's ability to earn income by operating efficiently. They focus primarily on the relationship between key income statement and balance sheet amounts. ANSWER: a POINTS: 1 123. The ratio of net income to net sales. ANSWER: i POINTS: 1 124. A measure of how efficiently a company used its assets to generate sales. ANSWER: f POINTS: 1 125. Measures that indicate a company's ability to meet its current debts as they come due. ANSWER: k POINTS: 1 126. The ratio of operating income to net sales. ANSWER: b POINTS: 1 127. The ratio of cost of goods sold to net sales. ANSWER: c POINTS: 1 128. A comparison of the amounts for the same item in the financial statements of two or more periods. ANSWER: g POINTS: 1

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Chapter 24—Analysis of Financial Statements 129. The ability to pay current debts when they come due. ANSWER: j POINTS: 1

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Chapter 25—Departmental Accounting 1. Departmental reports are used for internal management only; therefore the accounting rules for external reporting do not apply. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.118 - LO: 25-1 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. Many expenses of the entire business may be allocated to departments on a percentage basis. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 3. Indirect expenses may be allocated to departments based on the amount of sales of each individual department. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 4. Indirect expenses may be allocated to the departments based on the cost of goods sold in each department. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 5. Indirect expenses are subtracted from the total direct operating margin to calculate total operating income. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. Indirect expenses are allocated to specific departments to determine departmental direct operating margins. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 7. Departmental reports can be useful to creditors for performance evaluation purposes. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.118 - LO: 25-1 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. A departmental operating expense summary would show the total operating expenses for each department and the total operating expenses for the business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 9. A departmental operating expense summary typically shows both direct and indirect expenses for each department. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 10. A higher departmental gross profit or gross profit percentage means that a department is more profitable overall. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 11. Direct expenses are incurred for the sole benefit of and are traceable directly to a specific department. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. To compute departmental gross profit, it is necessary to determine the net sales, purchases, and inventory by departments. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 13. A department often uses a specialized sales journal to separate the revenue derived from its various products or services. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. A lower gross profit or gross profit percentage (by one department compared to another) means that one department is less profitable than another. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 15. The difference between a department's gross profit and its operating expenses is known as the departmental direct operating profit. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 16. To compute departmental operating income, it is necessary to determine the gross profit and the operating expenses of each department. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 17. Departmental reports are part of the basic financial statements of the business. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.118 - LO: 25-1 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. Indirect expenses are incurred for the benefit of the business as a whole and cannot be traced directly to a specific department. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 19. The difference between a department's net sales and cost of goods sold is known as the departmental operating income. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. If a department has a positive direct operating margin, it normally should be discontinued. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 21. Operating expenses that are incurred for the benefit of the business as a whole and that cannot be traced directly to any specific department are known as nonallocated expenses. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 22. Most businesses today determine departmental operating expenses through the use of general ledger accounts for departmental expenses. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 23. Departmental direct operating margin also shows a department's contribution to the company's overall operating income. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. Indirect operating expenses allocated to each department are normally approximations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 25. The assignment and allocation of departmental operating expenses can be summarized in a departmental gross profit summary. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. The difference between a department's gross profit and its direct operating expenses is known as the departmental direct operating margin. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 27. To compute departmental direct operating margin, it is necessary to determine the gross profit and the indirect operating expenses of each department. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 28. Each department should determine its direct operating margin and then subtract indirect expenses from that total as a basis for overall performance evaluation. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 29. Direct operating margin may be used as a basis for evaluating departmental performance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. An important part of the control process is to identify the strengths and weaknesses of the different parts of the firm. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.118 - LO: 25-1 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 31. To compute departmental operating income, direct expenses are assigned to departments based on the actual expenses incurred. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. Departmental reports can be used to evaluate managers' performance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.118 - LO: 25-1 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 33. Departmental gross profit is the difference between a department's net sales and the department's cost of goods sold. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 34. A departmental income statement showing gross profit can help management identify problems with both the sales prices and purchase prices of its products. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 35. Direct operating margin may be used as a basis for eliminating a department. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. Departmental operating expenses may be either direct or indirect. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 37. Indirect expenses are assigned to departments based on actual direct expenses incurred. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. Departmental reports are useful to management for all of the following purposes EXCEPT a. planning. b. controlling. c. determining revenues generating potential. d. determining performance potential. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.118 - LO: 25-1 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 39. Normally, the report prepared for a department is a(n) a. balance sheet. b. income statement. c. statement of retained earnings. d. cash flow statement. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.118 - LO: 25-1 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 40. The photo department of Santiago Company shows gross sales of $730,600 for chemical supplies and $934,900 for general office supplies. It has determined that chemical supplies cost $534,000 and that general office supplies cost $391,400. What is the gross profit percentage for the general office supplies section of the photo department? a. $543,500 b. 74.4% c. 72.0% d. 58.1% ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 25—Departmental Accounting 41. Gross profit less direct operating expenses equals a. indirect operating expenses. b. gross profit. c. direct operating margin. d. net income. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 42. The difference between a department's net sales and cost of goods sold is known as the a. departmental gross profit. b. departmental operating income. c. departmental operating expenses. d. departmental direct operating margin. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 43. The difference between a department's gross profit and its operating expenses is known as the a. departmental gross profit. b. departmental operating income. c. departmental operating expenses. d. departmental direct operating margin. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 44. Athletic Apparel and Sports Supplies are departments of World of Sports. Sheila manages both departments and employs three experts. Falana works full-time at Athletic Apparel and receives $1,000 each month; Carlos was originally hired to work full-time at Sports Supplies, but now works 60% of the time at Athletic Apparel and 40% of the time at Sports Supplies and receives $1,200 each month; Ana works full-time at Sports Supplies and receives $1,100 each month. To compute departmental operating income, how much salary expense would Sheila record? a. $3,300 for World of Sports b. $1,580 for Athletic Apparel; $1,720 for Sports Supplies c. $1,720 for Athletic Apparel; $1,580 for Sports Supplies d. $2,200 for Athletic Apparel; $1,100 for Sports Supplies ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 25—Departmental Accounting 45. A department may gather operating expense data by maintaining a. direct expenses. b. indirect expenses. c. amounts allocated to each department. d. total operating expenses for each department. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 46. All of the following are used to compute gross profit EXCEPT a. sales. b. sales discounts. c. account receivables. d. purchases. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 47. The PJC department of McIntyre Company shows gross sales of $730,600 for computer supplies and $934,900 for general office supplies. It has determined that computer supplies cost $534,000 and that general office supplies cost $391,400. What is the total gross profit for the PJC department? a. $934,900 b. $754,000 c. $1,590,900 d. $740,100 ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 1 min. 48. The PJC department of McIntyre Company shows gross sales of $730,600 for computer supplies and $934,900 for general office supplies. It has determined that computer supplies cost $534,000 and that general office supplies cost $391,400. What is the gross profit percentage for the computer supplies section of the PJC department? a. $196,600 b. 1.4% c. 26.9% d. 73.0% ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 25—Departmental Accounting 49. Departmental direct operating margin less departmental indirect expenses equals a. direct operating expenses. b. departmental income. c. total operating income. d. departmental operating income. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 50. Wadsworth Distribution Company has total advertising expenses of $84,000: $32,000 for radio and $52,000 for print advertising. The expense for print advertising is allocated to Department A and Department B based on the total of net sales represented by each department. The total net sales for Wadsworth Distribution Company is $744,000. The net sales generated are $558,000 and $186,000 for Department A and B, respectively. How much of the expense for print advertising should be allocated to Department A? a. $13,000 b. $39,000 c. $63,000 d. $21,000 ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 25—Departmental Accounting 51. The PJC department of McIntyre Company shows gross sales of $730,600 for computer supplies and $934,900 for general office supplies. It has determined that computer supplies cost $534,000 and that general office supplies cost $391,400. What is the gross profit percentage for the PJC department? a. $2,590,900 b. 64.32% c. 1.56% d. 44.44% ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 1 min. 52. Indirect expenses are allocated to departments based on a. generally accepted accounting principles. b. some reasonable basis. c. directives from the board of directors. d. decisions of the stockholders. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 53. The document that shows all operating expenses, their classification as direct or indirect, their assignment or allocation to the departments, and the total operating expenses for each department is known as the a. departmental operating expense summary. b. cash flow summary. c. income summary. d. gross profit summary. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 54. Indirect operating expenses are normally a. approximations. b. assigned by arbitrary methods. c. precise expenses determined by managers. d. overlooked. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 55. The bond department shows gross sales of $179,000 and cost of goods sold of $46,000. What is the gross profit of the bond department? a. $154,000 b. $133,000 c. 67.2% d. 32.8% ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 1 min. 56. The parts department shows gross sales of $116,000 and cost of goods sold of $38,000. What is the gross profit percentage of the parts department? a. 67.2% b. 32.8% c. 48.7% d. 51.3% ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Chapter 25—Departmental Accounting 57. Selena located an excellent office location and she and Ian rented the office space. Selena uses 30% of the space solely for her business; Ian uses 40% of the space solely for his business. The remainder is shared equally by both. How should the total rent and other space expenses be allocated? a. 30% to Selena; 40% to Ian b. 45% to Selena; 55% to Ian c. 50% to Selena; 50% to Ian d. 30% to Selena; 40% to Ian; 30% to Building Expense ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 1 min. 58. The difference between a department's gross profit and its direct operating expenses is known as the a. departmental gross profit. b. departmental operating income. c. departmental operating expenses. d. departmental direct operating margin. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 59. A department should be discontinued if it has a. a negative direct operating margin. b. consistent net sales. c. high direct operating expenses. d. a negative operating income. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 60. Direct expenses are assigned to departments based on a. estimated expenses. b. actual expenses. c. the percentage of total net sales represented by each department. d. the percentage of gross sales represented by each department. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 61. The sales, gross profit, and direct and indirect operating expenses of Departments A and B of Cardoba Inc. are as follows: Dept. A $420,000 243,000 205,000

Sales Gross profit Direct operating expenses Indirect operating expenses

Dept. B $290,000 197,000 118,000

Total $710,000 440,000 323,000 160,000

Required: Compute the departmental direct operating margin and direct operating margin percentage for each department. ANSWER: Gross profit Direct operating expenses Direct operating margin

Dept. A $243,000 205,000 $ 38,000

Dept. B $197,000 118,000 $ 79,000

Direct operating margin percentage: Department A $38,000 ÷ $420,000 = 9.05% Department B $79,000 ÷ $290,000 = 27.24% POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 5 min.

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Chapter 25—Departmental Accounting 62. The purchasing department of Lorenzo Corporation operates as a service department. The number of purchase orders processed during the most recent month are as follows: Eastern Division 83 purchase orders Central Division 48 purchase orders Western Division 29 purchase orders The monthly cost of operating the purchasing department, including personnel, amounted to $50,000.

Required: Allocate the cost of the purchasing department using the number of purchase orders as an allocation base. ANSWER:

83 + 48 + 29 = 160 Northern Division Central Division Southern Division

(83 ÷ 160) × $50,000 = $25,937.50 (48 ÷ 160) × $50,000 = 15,000.00 (29 ÷ 160) × $50,000 = 9,062.50 $50,000.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 5 min.

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Chapter 25—Departmental Accounting 63. Lifetime Inc. is trying to decide whether to discontinue Department C. Operating results for the year just ended for each of the company's three departments and for the entire operation are given below:

Sales Cost of goods sold Gross profit Direct operating expenses Departmental direct operating margin Indirect operating expenses Operating income (loss)

Dept. A $621,000 328,500 $292,500 137,300

Dept. B $399,500 251,500 $148,000 79,200

Dept. C Total $549,000 $1,569,500 388,200 968,200 $160,800 $ 601,300 145,800 362,300

$155,200 84,100 $ 71,100

$ 68,800 28,200 $ 40,600

$ 15,000 47,500 $(32,500)

$ 239,000 159,800 $ 79,200

Required: 1. Prepare an additional column that combines Departments A and B only. 2. Review all data and decide if Department C should be discontinued. Defend your decision. ANSWER:

1. Sales Cost of goods sold Gross profit Direct operating expenses Departmental direct operating margin Indirect operating expenses Operating income

Depts. A and B $1,020,500 580,000 $ 440,500 216,500 $ 224,000 159,800 $ 64,200

2. Eliminating Department C will cause a decrease in income for the company. Department C contributes $15,000 direct operating margin, which would be lost if the department were closed. Without Department C's contribution of $15,000, the company would have that much less net income, thus showing a net income of $64,200, versus present net income of $79,200. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 10 min.

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Chapter 25—Departmental Accounting 64. Roger owns an electronics store. He has divided his store into three departments. Net sales for the month of September are as follows: Audio Video Computers

$16,400 20,500 45,100

Advertising expense for September was $36,000.

Required: Allocate the advertising expense among the three departments on the basis of relative net sales. ANSWER:

$16,400 + $20,500 + $45,100 = $82,000 Audio Video Computers

($16,400 ÷ $82,000) × $36,000 = $ 7,200 ($20,500 ÷ $82,000) × $36,000 = 9,000 ($45,100 ÷ $82,000) × $36,000 = 19,800 $36,000

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Chapter 25—Departmental Accounting 65. Emma Fuentes and Carol Toner are partners in a business called Jump Start Corporation that sells athletic equipment. They have organized the business into three departments based on the type of merchandise sold. At the end of the first year of operations, the sales and cost of goods sold for the three departments are shown below:

Sales Cost of goods sold

Dept. A $54,400 41,400

Dept. B $78,600 39,200

Dept. C $24,600 11,600

Required: Prepare the gross profit section of a departmental income statement for the year ended December 31. Show the gross profit for each department and for the business as a whole. Dept. A Dept. B Sales $54,400 $78,600 Cost of goods sold 41,400 39,200 Gross profit $13,000 $39,400 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 5 min. ANSWER:

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Dept. C $24,600 11,600 $13,000

Total $157,600 92,200 $ 65,400

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Chapter 25—Departmental Accounting 66. Lalia rents 110,000 square feet of store space for $358,000 per year. The amount of square footage by department is shown below: Department A Department B Department C Department D

45,000 square feet 30,000 square feet 18,000 square feet 17,000 square feet

Required: Allocate the annual rent expense among the four departments on the basis of relative square feet of floor space occupied. ANSWER:

Department A Department B Department C Department D

(45,000 ÷ 110,000) × $358,000 = $146,454.55 (30,000 ÷ 110,000) × $358,000 = 97,636.36 (18,000 ÷ 110,000) × $358,000 = 58,581.82 (17,000 ÷ 110,000) × $358,000 = 55,327.27 $358,000.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 5 min.

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Chapter 25—Departmental Accounting 67. Justin owns an appliance store that offers free delivery. Mileage records are maintained for the three sales departments. Department 1 Department 2 Department 3

19,000 miles 32,000 miles 29,000 miles

The cost of using the truck for the last year including depreciation amounted to $12,000.

Required: Allocate the cost of the truck among the three sales departments on the basis of miles driven. ANSWER:

19,000 + 32,000 + 29,000 = 80,000 miles Department 1 Department 2 Department 3

(19,000 ÷ 80,000) × $12,000 = $ 2,850 (32,000 ÷ 80,000) × $12,000 = 4,800 (29,000 ÷ 80,000) × $12,000 = 4,350 $12,000

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Chapter 25—Departmental Accounting 68. The sales, gross profit, and direct and indirect operating expenses of Departments A and B of Wilmont Corporation are as follows: Dept. A $400,000 270,000 174,000

Sales Gross profit Direct operating expenses Indirect operating expenses

Dept. B $310,000 180,000 96,000

Total $710,000 450,000 270,000 90,000

Required: Compute the departmental direct operating margin and direct operating margin percentage for each department. ANSWER: Gross profit Direct operating expenses Direct operating margin

Dept. A $270,000 174,000 $ 96,000

Dept. B $180,000 96,000 $ 84,000

Direct operating margin percentage: Department A $96,000 ÷ $400,000 = 24% Department B $84,000 ÷ $310,000 = 27.1% POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 5 min.

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Chapter 25—Departmental Accounting 69. Departmental reports are useful to management for three purposes: ____________________, ____________________ and ____________________. ANSWER:

planning, control, performance evaluation planning, performance evaluation, control control, planning, performance evaluation control, performance evaluation, planning performance evaluation, planning, control performance evaluation, control, planning POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 70. To calculate the ____________________, take a department's gross profit and subtract its operating expenses. ANSWER: departmental operating income POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 71. To calculate the ____________________, take a department's gross profit and subtract its direct operating expenses. ANSWER: departmental direct operating margin POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.120 - LO: 25-4 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 72. Operating expenses that are incurred for the sole benefit of and are traceable to a specific department are known as ____________________. ANSWER: direct expenses POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 73. A(n) ____________________ reports the assignment and allocation of departmental operating expenses showing the classification of each operating expense as direct or indirect, the amount assigned or allocated to each department, and total operating expenses for each department. ANSWER: departmental operating expense summary POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.119 - LO: 25-3 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting 74. To compute departmental operating income, direct expenses are assigned to departments based on the ____________________. ANSWER: actual expense incurred POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 25—Departmental Accounting Match the terms with the definitions. a. departmental direct operating margin b. departmental gross profit c. departmental operating expense summary d. departmental operating income e. direct expenses f. indirect expenses DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.119 - LO: 25-3 COLL.HEIN.17.120 - LO: 25-4 COLL.HEIN.17.121 - LO: 25-2 ACCREDITING STANDARDS: AICPA FN-Decision Modeling AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 75. The difference between a department's net sales and cost of goods sold. ANSWER: b POINTS: 1 76. The difference between a department's gross profit and its operating expenses. ANSWER: d POINTS: 1 77. The assignment and allocation of departmental operating expenses, which shows the classification of each operating expense as direct or indirect, the amount assigned or allocated to each department, and total operating expenses for each department. ANSWER: c POINTS: 1 78. Operating expenses that are incurred for the benefit of the business as a whole. ANSWER: f POINTS: 1 79. Operating expenses that are incurred for the sole benefit of and are traceable to a specific department. ANSWER: e POINTS: 1 80. The difference between a department's gross profit and its direct operating expenses. ANSWER: a POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 1. Items acquired that either become a part of the finished product or are used in the process of manufacturing the finished product are known as materials. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. Manufacturing companies must maintain multiple inventory accounts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 3. Indirect labor costs are those costs to transform raw materials into a finished product. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 4. Those materials used in the manufacturing process that do not become a major part of the finished product are called direct materials. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 5. Those materials used in the manufacturing process that do not become a major part of the finished product are called indirect materials. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 6. Direct materials are often referred to as factory supplies. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 7. Direct labor includes the wages of employees who are directly involved in converting materials into finished goods. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. The costs of those employees who devote their time to converting the materials into finished goods are usually referred to as direct labor. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 9. Factory overhead consists of indirect materials, direct labor, and other factory expenses. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 10. Factory overhead normally consists of direct materials and indirect labor. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 11. The costs incurred to manufacture a product can be classified into three primary elements of manufacturing costs: materials, labor, and factory overhead. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. Indirect materials and indirect labor go through factory overhead into work in process. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.123 - LO: 26-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 13. The most significant difference between a manufacturer's income statement and a merchandiser's income statement is the use of "cost of goods manufactured" in the place of "purchases." a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.124 - LO: 26-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. Indirect wages includes the wages of employees who spend their time supervising or working in a general nature. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 15. The wages and salaries paid to the factory supervisor and janitors are charged to direct labor. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 16. Product cost information is useful in setting selling prices and in determining the profitability of each product. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 17. Products that are only partially completed at the end of the accounting period are known as finished goods. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.123 - LO: 26-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 18. Products that have been completed and are ready for sale at the end of the accounting period are known as costs of goods sold. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.123 - LO: 26-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 19. Using a predetermined overhead rate, an appropriate amount of factory overhead should be added to a job cost sheet. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 20. The main difference in the financial statements of a manufacturing business and a merchandiser is the cost of goods sold section of the income statement and the inventories on the balance sheet. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.124 - LO: 26-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. Overapplied overhead is normally transferred to work in process inventory. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 22. Process cost accounting is useful for costing homogeneous products such as base models of automobiles. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.126 - LO: 26-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 23. One inventory account is needed in a manufacturing business. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.123 - LO: 26-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. The wages paid to those who devote their time to supervision or to work of a general nature in the manufacturing process are included in the indirect costs of the factory operation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.123 - LO: 26-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 25. Materials inventory consists of all products on which work has been started but is not yet finished at the end of the accounting period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.123 - LO: 26-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. The key difference between a manufacturing and a merchandising business involves inventory. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.123 - LO: 26-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. A manufacturer makes the items it sells, rather than purchasing them in final form. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 28. The cost of goods sold section of the manufacturer's income statement is commonly supplemented by a schedule of cost of goods manufactured. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.124 - LO: 26-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. A merchandising business acquires and holds inventory in only one form-finished and ready for sale. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 30. A manufacturing business acquires materials in one form and converts or processes them into a different form for final sale. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 31. Material inventory includes both direct and indirect materials. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.123 - LO: 26-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. A cost accounting system is a system for accumulating detailed information about the cost of producing a product. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 33. There are two basic types of cost accounting systems: manufacturing costing and merchandising costing. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 34. If the product is made to a customer's orders or specifications or if products are made in separately identifiable "lots" or "batches," a process cost system is appropriate. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 35. The use of a periodic inventory system generally is desirable in accounting for manufacturing inventories. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. A subsidiary ledger, called a materials requisition, is used to show the quantity, the cost of materials received and issued, and the resulting balances. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 37. The earnings of workers whose services are considered to be direct labor must be charged to the proper factory overhead accounts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. The earnings of workers whose services are considered to be indirect labor must be charged directly to the jobs on which they worked. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 39. Property taxes on the factory buildings should be charged to factory overhead. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 40. The many types of factory overhead costs make it desirable to use a factory overhead subsidiary ledger. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 41. In a process cost system, costs attach to products and are passed from one process to another. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.126 - LO: 26-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 42. The inventory accounts used in a manufacturing business are a. merchandise, materials, and work in process. b. materials, work in process, and finished goods. c. merchandise, materials, and finished goods. d. merchandise, work in process, and finished goods. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.123 - LO: 26-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 43. A cost accounting system uses which of the following inventory systems? a. periodic system b. perpetual system c. both a periodic and perpetual system d. a hands-on system ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 44. Materials used in the manufacturing process that do not become a significant part of the finished products are called a. indirect materials. b. operating expenses. c. direct materials. d. administrative expenses. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 45. Wages paid to those employees who devote their time to converting the materials into finished goods are called a. indirect materials. b. indirect labor. c. direct materials. d. direct labor. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 46. It is estimated that during the coming year, factory overhead costs will be $675,000 and direct labor costs will be $750,000. The predetermined overhead rate as a percentage of direct labor costs for that year would be a. 0.9%. b. 1.11%. c. 90%. d. 111%. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Applying NOTES: 1 min. 47. Materials and direct labor flow into which of the following accounts? a. finished goods b. work in process c. cost of goods sold d. operating expenses ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.123 - LO: 26-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 48. Wages paid to those employees who devote their time to supervision or to work of a general nature are referred to as a. indirect materials. b. indirect labor. c. direct materials. d. direct labor. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 49. A schedule of cost of goods manufactured shows all of the following EXCEPT a. indirect materials. b. beginning work in process. c. goods available for sale. d. ending work in process. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.124 - LO: 26-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 50. Production cost information is needed to assist with all of the following EXCEPT a. setting selling prices. b. controlling production costs. c. determining overhead. d. determining the net income or loss. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 51. Depreciation of factory buildings and equipment is an example of a. direct labor. b. direct materials. c. factory overhead. d. operating expenses. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 52. The vacation pay of factory workers may be charged to a. indirect labor. b. direct labor. c. factory overhead. d. administrative expenses. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 53. A system for accumulating detailed information about the cost of producing a product is known as a a. product costing system. b. cost accounting system. c. financial accounting system. d. managerial accounting system. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 54. Products that have been completed and are ready for sale at the end of the accounting period are known as a. materials. b. work in process. c. finished goods. d. cost of goods sold. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 55. Products that have been started but are only partially complete at the end of the accounting period are known as a. materials. b. work in process. c. finished goods. d. cost of goods sold. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 56. Items acquired that either become a part of the finished product or are used in the process of manufacturing the finished product are known as a. materials. b. work in process. c. finished goods. d. cost of goods sold. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 57. Materials that enter into and become a significant part of the finished product are called a. indirect materials. b. operating expenses. c. direct materials. d. administrative expenses. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 58. If a product is made to customers' orders or specifications or if products are made in separately identifiable "lots" or "batches," the appropriate cost accounting system is a a. job order system. b. process system. c. perpetual system. d. periodic system. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 59. Under a perpetual inventory system, the sale of a manufactured product requires an entry a. debiting Cost of Goods Sold and crediting Finished Goods. b. debiting Cost of Goods Sold and crediting Work in Process. c. debiting Finished Goods and crediting Work in Process. d. debiting Finished Goods and crediting Cost of Goods Sold. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 60. The purchase of direct and indirect materials on account during the month requires an entry a. debiting Work in Process and crediting Materials. b. debiting Materials and crediting Accounts Payable. c. debiting Accounts Payable and crediting Materials. d. debiting Materials and crediting Work in Process. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 61. When direct and indirect materials are issued into production from storage, an entry is made a. debiting Work in Process, debiting Factory Overhead, and crediting Materials. b. debiting Work in Process and crediting Materials. c. debiting Materials, crediting Work in Process, and crediting Factory Overhead. d. debiting Factory Overhead, crediting Work in Process, and crediting Materials. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 62. To recognize indirect and direct factory labor cost for the month, an entry is made a. debiting Payroll Expense, debiting Work in Process, and crediting Factory Overhead. b. debiting Work in Process, debiting Factory Overhead, and crediting Payroll Expense. c. debiting Work in Process, debiting Factory Overhead, and crediting Wages Payable. d. debiting Factory Overhead, debiting Payroll Expense, and crediting Accounts Payable. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 63. To apply factory overhead to work in process, an entry is made a. debiting Factory Overhead and crediting Work in Process. b. debiting Work in Process and crediting Factory Overhead. c. debiting Cost of Goods Sold and crediting Work in Process. d. debiting Factory Overhead and crediting Cost of Goods Sold. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 64. The entry to record other factory overhead costs incurred during the month would include a. a debit to Factory Overhead. b. a credit to Factory Overhead. c. a debit to Work in Process. d. a credit to Work in Process. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 65. Which of the following information would NOT be included on the job cost sheet? a. cost of direct materials b. cost of direct labor c. cost of factory overhead applied d. cost of indirect labor ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 66. The entry to record indirect labor costs incurred during the month would include a debit to a. Wages Payable. b. Factory Overhead. c. Work in Process. d. Materials. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 67. The entry to recognize the completion and transfer of a job so that it can be placed in stock would include a. debiting Finished Goods and crediting Cost of Goods Sold. b. debiting Finished Goods and crediting Work in Process. c. debiting Work in Process and crediting Cost of Goods Sold. d. debiting Work in Process and crediting Finished Goods. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 68. Which of the following products would most likely be accounted for using a process cost system? a. custom-ordered trophies b. luxury cruise ships c. modeling clay d. leather furniture ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.126 - LO: 26-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 69. Rozlyn Corporation makes children's toys. It applies overhead at the rate of 110% of direct labor costs. During the year, the labor costs were $130,000. The actual overhead was $142,000. Make the appropriate general journal entry dated December 31, 20--, to adjust the factory overhead account balance (under- or overapplied) for the year. GENERAL JOURNAL Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Description Date Dec. 31 Factory Overhead Cost of Goods Sold

Page 1 Post Ref.

Debit 1,000.00

Credit 1,000.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Applying NOTES: 5 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 70. The following information is supplied for Lexington Corporation. Prepare a schedule of cost of goods manufactured for the year ended December 31, 20--. Work in process, January 1, 20-Materials inventory, January 1, 20-Materials purchases Materials inventory, December 31, 20-Direct labor Factory overhead Work in process, December 31, 20--

$85,000 47,200 50,800 48,200 54,700 21,000 64,400

ANSWER: Lexington Corporation Schedule of Cost of Goods Manufactured For the Year Ended December 31, 20-Work in process, January 1, 20-Materials inventory, January 1, 20-$47,200 Materials purchases 50,800 Materials available for use $98,000 Materials inventory, December 31, 20-48,200 Cost of materials used $ 49,800 Direct labor 54,700 Factory overhead 21,000 Total manufacturing costs Total work in process during the period Work in process, December 31, 20-Cost of goods manufactured POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.124 - LO: 26-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Applying NOTES: 5 min.

$ 85,000

125,500 $210,500 64,400 $146,100

71. The following information pertains to Ortega Corporation for the year ended December 31, 20--. Sales Purchases of materials Indirect labor Indirect materials Depreciation of factory equipment Depreciation of factory building Selling expenses Other factory overhead expenses Direct labor Cengage Learning Testing, Powered by Cognero

$978,000 176,000 42,000 12,000 5,300 18,000 44,000 48,000 392,000 Page 32

Chapter 26—Manufacturing Accounting: The Job Order Cost System Materials inventory, December 31, 20-Work in process, January 1, 20-Materials inventory, January 1, 20-Work in process, December 31, 20-Finished goods inventory, January 1, 20-Finished goods inventory, December 31, 20--

36,000 72,000 24,000 98,000 112,000 116,000

Required: Prepare a statement of cost of goods manufactured. ANSWER: Ortega Company Schedule of Cost of Goods Manufactured For the Year Ended December 31, 20-Work in process, January 1, 20-Direct materials: Materials inventory, January 1, 20-$ 24,000 Materials purchases 176,000 Materials available for use $200,000 Materials inventory, December 31, 20-36,000 Cost of materials used 164,000 Less indirect materials included in overhead 12,000 Cost of direct materials used $152,000 Direct labor 392,000 Factory overhead: Indirect labor $ 42,000 Indirect materials 12,000 Depreciation factory equipment 5,300 Depreciation factory building 18,000 Other factory overhead 48,000 Total factory overhead 125,300 Total manufacturing costs Total work in process during the period Work in process, December 31, 20-Cost of goods manufactured POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.124 - LO: 26-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Applying NOTES: 15 min.

$ 72,000

669,300 $741,300 98,000 $643,300

72. Step-in-Time Manufacturing had the following transactions for its job order costing operation: Cengage Learning Testing, Powered by Cognero

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Chapter 26—Manufacturing Accounting: The Job Order Cost System Mar. 4 8 15 31 31 31

Purchased materials on account, $31,000. Direct materials requisitioned to production, Job No. 101, $24,000. Indirect materials (factory overhead) requisitioned to production, $16,000. Direct labor, Job No. 101, $20,500. Indirect labor (factory overhead), $9,750. Other indirect costs (factory overhead, credit Accounts Payable), $12,200.

Required: Prepare general journal entries to record these transactions. GENERAL JOURNAL Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Description

Date Mar. 4 Materials Accounts Payable

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Page 1 Post Ref.

Debit 31,000.00

Credit 31,000.00

8 Work in Process (Job No. 101) Materials

24,000.00

15 Factory Overhead Materials

16,000.00

31 Work in Process (Job No. 101) Wages Payable

20,500.00

24,000.00

16,000.00

20,500.00

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 31 Factory Overhead Wages Payable

9,750.00

31 Factory Overhead Accounts Payable

12,200.00

9,750.00

12,200.00

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Description Date Dec. 31 Cost of Goods Sold Factory Overhead

Page 1 Post Ref.

Debit 2,000.00

Credit 2,000.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Applying NOTES: 5 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 74. The following information is supplied for Chang Manufacturing Company. Work in process, January 1, 20-Materials inventory, January 1, 20-Materials purchases Materials inventory, December 31, 20-Direct labor Factory overhead Work in process, December 31, 20--

$23,725 11,800 12,700 10,900 15,400 6,700 19,500

Required: Prepare a schedule of cost of goods manufactured for the year ended December 31, 20--. ANSWER: Chang Manufacturing Company Schedule of Cost of Goods Manufactured For the Year Ended December 31, 20-Work in process, January 1, 20-Materials inventory, January 1, 20-$11,800 Materials purchases 12,700 Materials available for use $24,500 Materials inventory, December 31, 20-10,900 Cost of materials used $13,600 Direct labor 15,400 Factory overhead 6,700 Total manufacturing costs Total work in process during the period Work in process, December 31, 20-Cost of goods manufactured POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.124 - LO: 26-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Applying NOTES: 10 min.

$23,725

35,700 $59,425 19,500 $39,925

75. The following information pertains to Skylark Manufacturing Corporation for the year ended December 31, 20--. Sales Purchases of materials Indirect labor Indirect materials Depreciation of factory equipment Depreciation of factory building Selling expenses Cengage Learning Testing, Powered by Cognero

$244,500 44,000 8,300 3,000 3,700 4,500 11,000 Page 36

Chapter 26—Manufacturing Accounting: The Job Order Cost System Other factory overhead expenses Direct labor Materials inventory, December 31, 20-Work in process, January 1, 20-Materials inventory, January 1, 20-Work in process, December 31, 20-Finished goods, January 1, 20-Finished goods, December 31, 20--

12,000 89,000 9,000 18,000 6,000 22,500 29,000 22,000

Required: Complete the statement of cost of goods manufactured. ANSWER: Skylark Manufacturing Corporation Schedule of Cost of Goods Manufactured For the Year Ended December 31, 20-Work in process, January 1, 20-Direct materials: Materials inventory, January 1, 20-$ 6,000 Materials purchases 44,000 Materials available for use $50,000 Materials inventory, December 31, 20-9,000 Cost of materials used 41,000 Less indirect materials included in overhead 3,000 Cost of direct materials used $38,000 Direct labor 89,000 Factory overhead: Indirect labor $ 8,300 Indirect materials 3,000 Depreciation factory equipment 3,700 Depreciation factory building 4,500 Other factory overhead 12,000 Total factory overhead 31,500 Total manufacturing costs Total work in process during the period Work in process, December 31, 20-Cost of goods manufactured POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.124 - LO: 26-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Applying NOTES: 15 min. Cengage Learning Testing, Powered by Cognero

$ 18,000

158,500 $176,500 22,500 $154,000

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 76. O'Connell Corporation had the following transactions for its job order costing operation. Apr. 4 7 12 16 22 28

Purchased materials on account, $17,000. Direct materials requisitioned to production, Job No. 106, $15,800. Direct labor, Job No. 106, $15,200. Indirect materials (factory overhead) requisitioned to production, $3,300. Indirect labor (factory overhead), $2,400. Other indirect costs (factory overhead, credit Accounts Payable), $2,700.

Required: Prepare general journal entries to record these transactions. GENERAL JOURNAL Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Description Date Apr. 4 Materials Accounts Payable

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Page 1 Post Ref.

Debit 17,000.00

Credit 17,000.00

7 Work in Process (Job No. 106) Materials

15,800.00

12 Work in Process (Job. No. 106) Wages Payable

15,200.00

16 Factory Overhead

3,300.00

15,800.00

15,200.00

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Chapter 26—Manufacturing Accounting: The Job Order Cost System Materials

3,300.00

22 Factory Overhead Wages Payable

2,400.00

28 Factory Overhead Accounts Payable

2,700.00

2,400.00

2,700.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Applying NOTES: 10 min. 77. The account in which materials, labor, and overhead costs of producing a product are accumulated until the product is completed is the ____________________ account. ANSWER: work in process POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.123 - LO: 26-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 78. If the amount applied is less than actual overhead cost incurred, the difference is called ____________________. ANSWER: underapplied overhead POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 79. A(n) ____________________ is a subsidiary ledger that shows the quantity, cost, material received and issued, and resulting balance for each type of material. ANSWER: materials ledger POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 80. A(n) ____________________ is a subsidiary ledger for the work in process control account that is made up of job cost sheets. ANSWER: job cost ledger POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 81. A(n) ____________________ is a form used to issue materials from the storeroom to production. It is both an authorization to the storekeeper to issue materials and a source document showing the movement of materials. ANSWER: materials requisition POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 82. The wages of employees who are directly involved in converting materials into finished goods are known as ____________________. ANSWER: direct labor POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 83. Direct materials and direct labor go directly into ____________________. ANSWER: work in process POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.123 - LO: 26-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 84. A(n) ____________________ accumulates detailed information regarding the cost of producing a product. ANSWER: cost accounting system POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 85. The ____________________ accumulates manufacturing costs by process, such as cutting, painting, or finishing; and assigns each unit of product passing through the process a share of the costs. ANSWER: process cost system POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 86. The ____________________ is a ledger in which details of the different types of factory overhead costs are accumulated. ANSWER: factory overhead subsidiary ledger POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 87. ____________________ are used in the manufacturing process but do not become a major part of the finished product. ANSWER: Indirect materials POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 88. All manufacturing costs other than direct materials and direct labor are classified as ____________________. ANSWER: factory overhead POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 89. ____________________ includes the wages and salaries of employees who devote their time to supervision or to work of a general nature. ANSWER: Indirect labor POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 90. The cost of goods manufactured on the manufacturer's income statement replaces ____________________ on the merchandiser's income statement. ANSWER: purchases POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.124 - LO: 26-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 91. Those materials that enter into and become a major part of the finished product are called ____________________. ANSWER: direct materials POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.122 - LO: 26-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 92. The account that includes all the materials (both direct and indirect) acquired to be used in production is called ____________________. ANSWER: Materials Inventory POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.123 - LO: 26-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 93. The ____________________ provides a separate record of the cost of each individual product or group of products that is produced. ANSWER: job order cost system POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 94. The ____________________ rate is used to apply overhead based on production activity such as direct labor hours, direct labor costs, or machine hours; used because of the difficulties of relating specific costs to specific jobs. ANSWER: predetermined overhead POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 95. A(n) ____________________ is a document for recording the direct materials, direct labor, and factory overhead costs incurred on a specific job. ANSWER: job cost sheet POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 96. The ____________________ is a subsidiary ledger in which a separate account for each product is kept. ANSWER: finished goods ledger POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 97. A(n) ____________________ system accumulates manufacturing costs by process. ANSWER: process cost POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. Work in Process b. process cost system c. overapplied overhead d. direct materials e. materials requisition f. factory overhead subsidiary ledger g. Finished Goods Inventory h. materials ledger i. job order cost system j. indirect materials k. job cost sheet DIFFICULTY: LEARNING OBJECTIVES:

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 100. The system that accumulates manufacturing costs by process, such as cutting, painting, or finishing; and assigns each unit of product passing through the process a share of the costs. ANSWER: b POINTS: 1 101. The ledger in which details of the different types of factory overhead costs are accumulated. ANSWER: f POINTS: 1 102. Those materials used in the manufacturing process that do not become a major part of the finished product. ANSWER: j POINTS: 1 103. The system that provides a separate record of the cost of each individual product or group of products that is produced. ANSWER: i POINTS: 1 104. Those materials that enter into and become a major part of the finished product. ANSWER: d POINTS: 1 105. The subsidiary ledger that shows the quantity, cost, material received and issued, and resulting balance for each type of material. ANSWER: h POINTS: 1 106. A form used to issue materials from the storeroom to production. It serves as both an authorization to the storekeeper to issue materials and a source document showing the movement of materials. ANSWER: e POINTS: 1 107. The account in which materials, labor, and overhead costs of producing a product are accumulated until the product is completed. ANSWER: a POINTS: 1 108. The difference between the overhead applied and the actual overhead cost incurred if the amount of applied overhead is greater than actual overhead cost incurred. ANSWER: c POINTS: 1 Match the terms with the definitions. a. cost accounting system b. daily time sheet c. direct labor Cengage Learning Testing, Powered by Cognero

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Chapter 26—Manufacturing Accounting: The Job Order Cost System d. underapplied overhead e. factory overhead f. predetermined overhead rate g. Materials Inventory h. finished goods ledger i. indirect labor j. job cost ledger DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.122 - LO: 26-1 COLL.HEIN.17.123 - LO: 26-2 COLL.HEIN.17.125 - LO: 26-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-34-Job Order Costing KEYWORDS: Bloom's: Remembering NOTES: 1 min. 109. A subsidiary ledger for the work in process control account that is made up of job cost sheets. ANSWER: j POINTS: 1 110. A record of the time worked and labor cost incurred on each job. ANSWER: b POINTS: 1 111. The difference between the overhead applied and the actual overhead cost incurred if the amount of applied overhead is less than actual overhead cost incurred. ANSWER: d POINTS: 1 112. The rate used to apply overhead based on production activity (direct labor hours, direct labor costs, or machine hours) used because of the difficulties of relating specific costs to specific jobs. ANSWER: f POINTS: 1 113. All manufacturing costs other than direct materials and direct labor. ANSWER: e POINTS: 1 114. The subsidiary ledger in which a separate account for each product is kept. ANSWER: h POINTS: 1

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Chapter 26—Manufacturing Accounting: The Job Order Cost System 115. The account that includes all the materials (both direct and indirect) acquired to be used in production. ANSWER: g POINTS: 1 116. The wages of employees who are directly involved in converting materials into finished goods. ANSWER: c POINTS: 1 117. A system for accumulating detailed information regarding the cost of producing a product. ANSWER: a POINTS: 1 118. The wages and salaries of employees who devote their time to supervision or to work of a general nature. ANSWER: i POINTS: 1

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Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 1. Underapplied overhead is adjusted on the work sheet by debiting Overapplied Overhead and crediting Work in Process Inventory. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. Overapplied overhead is adjusted on the work sheet by debiting Overapplied Overhead and crediting Work in Process Inventory. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 3. With a perpetual inventory system, the movement of goods from materials to work in process to finished goods to cost of goods sold is recorded as the movement occurs. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.128 - LO: 27-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 4. To record an adjustment for income tax for the period, Corporate Income Tax is debited and Income Tax Expense is credited. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 5. A manufacturing company's work sheet includes three inventory accounts. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.128 - LO: 27-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. Debits in the factory overhead account represent the overhead applied to production. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.128 - LO: 27-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 7. The entry to apply factory overhead to work in process ending inventory includes a debit to Work in Process Inventory and a credit to Factory Overhead. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 8. Factory overhead must be applied to work in process at the end of the year, even though those jobs are not yet finished. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 9. The amount of interest due on notes and bonds payable owed by the company is adjusted on the work sheet by debiting Interest Expense and crediting Accrued Interest Payable. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 10. The estimated amount of uncollectible accounts is adjusted on the work sheet by debiting Allowance for Bad Debts and crediting Bad Debt Expense. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 11. In a corporation, the stockholders' equity section contains information regarding capital stock, paid-in capital in excess of par, and retained earnings. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.129 - LO: 27-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 12. The amount of expired factory equipment insurance is adjusted on the work sheet by debiting Equipment Insurance Expense. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 13. The income statement of a manufacturer is commonly supported by a schedule of cost of goods manufactured. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.129 - LO: 27-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. All of the data for the statement of retained earnings is taken from the Balance Sheet columns of the work sheet. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.129 - LO: 27-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 15. Manufacturing companies will include three inventory accounts in the liability section of the balance sheet. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.129 - LO: 27-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 16. Factory Overhead has a zero balance after all adjustments, so it is not necessary to close the account at the end of the accounting period. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.130 - LO: 27-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 17. Both the debit and the credit balances in Factory Overhead are closed to Income Summary. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.130 - LO: 27-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. To close operating expenses at the end of the year, Income Summary is credited. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.130 - LO: 27-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 19. Factory building insurance expense is part of factory overhead. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 20. Manufacturing company and merchandising company work sheets are prepared using the same five steps. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.128 - LO: 27-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 21. In a perpetual inventory system, costs of goods sold are accumulated in the cost of goods sold account as sales occur during the year. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.128 - LO: 27-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 22. In a periodic inventory system, costs of goods sold are computed through an adjustment process at the end of the period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.128 - LO: 27-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 23. In a perpetual inventory system, the inventory accounts reflects ending balances. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.128 - LO: 27-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. On a work sheet for a manufacturing company, Factory Overhead shows both a debit and a credit balance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.128 - LO: 27-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 25. Debits in the factory overhead account represent the actual overhead costs incurred. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.128 - LO: 27-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. The adjustment for corporate income tax should be reversed. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.130 - LO: 27-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 27. Factory overhead is applied at a predetermined rate when a job is completed. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.130 - LO: 27-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 28. If factory overhead applied is less than the adjusted debit balance of Factory Overhead, the difference is known as underapplied overhead. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 29. If factory overhead applied is more than the adjusted debit balance of Factory Overhead, the difference is known as underapplied overhead. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 30. The difference between the debits and credits for each pair of columns in the Income Statement and Balance Sheet sections of the work sheet represents net income or net loss. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 31. Both debit and credit balances of Factory Overhead are shown in the Adjusted Trial Balance columns of the work sheet; however, neither of these amounts is extended to the Income Statement or to the Balance Sheet columns. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 32. Overhead must be applied to work in process at year end. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 33. The supplementary schedule of cost of goods sold is unique to a manufacturing company. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.129 - LO: 27-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 34. All of the data for the income statement is obtained from the Income Statement columns of the work sheet. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.129 - LO: 27-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

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Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 35. The entry to close Cost of Goods Sold at the end of the year includes a debit to Income Summary. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.130 - LO: 27-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. To close Income Summary at the end of the year, Retained Earnings is credited for the amount of net income. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.130 - LO: 27-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 15

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 37. The amount of interest due on notes and bonds payable owed by the company is adjusted by a. debiting Interest Payable and crediting Cost of Goods Sold. b. debiting Interest Payable and crediting Interest Expense. c. debiting Interest Expense and crediting Interest Payable. d. debiting Interest Expense and crediting Cost of Goods Sold. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. Which of the following accounts on the manufacturing company work sheet is NOT an asset account? a. work in process inventory b. factory overhead c. prepaid insurance d. finished goods inventory ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.128 - LO: 27-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 16

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 39. The adjusting entry to apply factory overhead to the work in process ending inventory includes a. debiting Finished Goods Inventory and crediting Factory Overhead. b. debiting Work in Process Inventory and crediting Factory Overhead. c. debiting Factory Overhead and crediting Work in Process Inventory. d. debiting Factory Overhead and crediting Finished Goods Inventory. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 40. Which of the following statements is NOT true of manufacturing company accounting? a. Materials inventory represents the raw materials purchased by the company to use in the production of its product(s). b. Inventories are divided into three separate accounts. c. Factory overhead debits represent the overhead that has been applied to production. d. Factory overhead shows both a debit and a credit balance on the work sheet. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.128 - LO: 27-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 17

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 41. Source data for the work in process inventory as of the end of the accounting period comes from the a. materials inventory in the general ledger. b. work in process inventory in the general ledger. c. Balance Sheet columns of the work sheet. d. Income Statement columns of the work sheet. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.129 - LO: 27-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 42. If the estimated amount of uncollectible accounts at the end of the year (based on the aging method) was $3,675.32 and Allowance for Bad Debts had a credit balance of $860, the necessary adjustment would include a. debiting Allowance for Bad Debts, $3,675.32. b. crediting Allowance for Bad Debts, $3,675.32. c. debiting Bad Debt Expense, $2,815.32. d. crediting Bad Debt Expense, $2,815.32. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 18

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 43. The amount of expired factory equipment insurance is adjusted by a. debiting Factory Overhead and crediting Prepaid Insurance. b. debiting Equipment Insurance Expense and crediting Factory Overhead. c. debiting Prepaid Insurance and crediting Equipment Insurance Expense. d. debiting Prepaid Insurance and crediting Accounts Payable. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 44. Factory supplies used during the year is adjusted by a. debiting Factory Supplies and crediting Factory Supplies Expense. b. debiting Factory Supplies Expense and crediting Factory Supplies. c. debiting Office Supplies Expense and crediting Factory Supplies Payable. d. debiting Factory Overhead and crediting Factory Supplies. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 19

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 45. The amount of uncollectible accounts is adjusted by a. debiting Factory Overhead and crediting Accounts Receivable. b. debiting Bad Debt Expense and crediting Factory Overhead Applied. c. debiting Factory Overhead and crediting Allowance for Bad Debts. d. debiting Bad Debt Expense and crediting Allowance for Bad Debts. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 46. Source data for work in process at the beginning of the accounting period comes from the a. materials inventory in the general ledger. b. work in process inventory in the general ledger. c. Adjusted Trial Balance columns of the work sheet. d. Income Statement columns of the work sheet. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.129 - LO: 27-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 20

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 47. The adjustment to increase Income Tax Expense includes a. debiting Factory Overhead and crediting Income Tax Payable. b. debiting Income Tax Payable and crediting Income Tax Payable. c. debiting Income Tax Expense and crediting Factory Overhead. d. debiting Income Tax Expense and crediting Income Tax Payable. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 48. If factory overhead applied is more than the adjusted debit balance of Factory Overhead, the difference is known as a. underapplied overhead. b. overapplied overhead. c. organization costs. d. adjusted work in process. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 21

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 49. If factory overhead applied is less than the adjusted debit balance of Factory Overhead, the difference is known as a. underapplied overhead. b. cost of goods sold. c. overabsorbed overhead. d. overapplied overhead. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 50. Which of the following adjustments is NOT made to Factory Overhead on the work sheet? a. factory equipment insurance b. factory building insurance c. office supplies d. factory supplies ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 22

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 51. The depreciation of factory equipment is adjusted by a. debiting Depreciation Expense and crediting Factory Equipment. b. debiting Factory Overhead and crediting Accumulated Depreciation-Factory Equipment. c. debiting Accumulated Depreciation-Factory Equipment and crediting Factory Overhead. d. debiting Accumulated Depreciation-Factory Equipment and crediting Depreciation Expense. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.127 - LO: 27-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 52. Source data for direct labor comes from the a. materials inventory in the general ledger, b. work in process inventory in the general ledger. c. Adjusted Trial Balance columns of the work sheet. d. Income Statement columns of the work sheet. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.129 - LO: 27-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 23

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 53. Source data for the beginning materials inventory comes from the a. materials inventory in the general ledger. b. work in process inventory in the general ledger. c. Adjusted Trial Balance columns of the work sheet. d. Income Statement columns of the work sheet. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.129 - LO: 27-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 54. The balance of retained earnings at the beginning of the year was $475,000, and the balance at the end of the year was $550,000. Cash dividends declared during the year were $35,000. The amount of net income for the year was a. $75,000. b. $515,000. c. $110,000. d. $80,000. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.130 - LO: 27-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Page 24

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 55. The entry to close operating expenses includes a. debiting Operating Expenses. b. debiting Income Summary. c. debiting Retained Earnings. d. debiting Cost of Goods Sold. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.130 - LO: 27-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 56. In the factory overhead account, the debit represents the a. actual overhead cost incurred. b. estimated overhead cost incurred. c. actual overhead to be applied to production. d. estimated overhead to be applied to production. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.129 - LO: 27-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 25

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 57. Which of the following steps are involved in closing the temporary accounts of a manufacturing business? a. The balance of Factory Overhead is credited to Income Summary. b. The balances of operating expense accounts are credited to Income Summary. c. The balance of Cost of Goods Sold is credited to Income Summary. d. The balance of Retained Earnings is credited to Income Summary. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.130 - LO: 27-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 58. Which of the following accounts is not closed at the end of the accounting period? a. Factory Overhead b. Allowance for Bad Debts c. Cost of Goods Sold d. Income Summary ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.130 - LO: 27-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 26

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 59. The entry to close Cost of Goods Sold includes a. debiting Income summary and crediting Cost of Goods Sold. b. debiting Cost of Goods Sold and crediting Income Summary. c. debiting Retained Earnings and crediting Cost of Goods Sold. d. debiting Cost of Goods Sold and crediting Retained Earnings. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.130 - LO: 27-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 60. The entry to close Income Summary for a loss would include a. a credit to Income Summary. b. a credit to Retained Earnings. c. a debit to Capital Stock. d. a debit to Income Summary. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.130 - LO: 27-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Remembering NOTES: 1 min. 61. Prepare the year-end adjusting entries in general journal form for Dombrowski Corporation. Information for the yearend adjustments is as follows: Factory overhead to be applied to work in process ending inventory Interest receivable Office supplies used Factory supplies used Provision for uncollectible accounts Insurance expired on factory building and equipment Depreciation on factory building Depreciation on factory equipment Cengage Learning Testing, Powered by Cognero

$21,700 1,400 8,400 10,600 13,900 3,100 17,800 8,600 Page 27

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements GENERAL JOURNAL Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Description Date Adjusting Entries Dec. 31 Work in Process Inventory Factory Overhead

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Page 1 Post Ref.

Debit

Credit

21,700.00 21,700.00

31 Interest Receivable Interest Revenue

1,400.00

31 Office Supplies Expense Office Supplies

8,400.00

31 Factory Overhead Factory Supplies

10,600.00

31 Bad Debt Expense Allowance for Bad Debts

13,900.00

1,400.00

8,400.00

10,600.00

13,900.00 Page 28

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 31 Factory Overhead Prepaid Insurance

3,100.00

31 Factory Overhead Accumulated Depreciation—Factory Building

17,800.00

31 Factory Overhead Accumulated Depreciation—Factory Equipment

8,600.00

3,100.00

17,800.00

8,600.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.130 - LO: 27-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 15 min. 62. From the adjusting entries below, prepare the reversing entry(ies) that would be needed on January 1. GENERAL JOURNAL Description Adjusting Entries Dec. 31 Work in Process Inventory Factory Overhead Date

Page 1 Post Ref.

Debit 22,300.00

22,300.00

31 Interest Receivable Interest Revenue

2,400.00

31 Office Supplies Expense Office Supplies

7,200.00

31 Factory Overhead Factory Supplies

23,700.00

31 Bad Debt Expense Allowance for Bad Debts

5,700.00

31 Factory Overhead Prepaid Insurance

1,200.00

31 Factory Overhead Accumulated Depreciation—Factory

7,200.00

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Credit

2,400.00

7,200.00

23,700.00

5,700.00

1,200.00

Page 29

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements Building

7,200.00

31 Factory Overhead Accumulated Depreciation—Factory Equipment

18,100.00 18,100.00

GENERAL JOURNAL Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Date Jan.

Description Reversing Entries 1 Factory Overhead Work in Process Inventory

Page 1 Post Ref.

1 Interest Revenue Interest Receivable

Debit

Credit

22,300.00 22,300.00 2,400.00 2,400.00

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.130 - LO: 27-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 15 min. 63. From the data below for the Sorta Company, prepare the closing entries for the year ended December 31, 20--. Cash dividends Sales Sales returns and allowances Interest revenue Factory overhead (debit) Factory overhead (credit) Cost of goods sold Wages expense Cengage Learning Testing, Powered by Cognero

$105,000 987,000 5,200 3,700 205,300 205,300 674,200 112,000 Page 30

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements Supplies expense Depreciation expense—office equipment Utilities expense Bad debt expense Advertising expense Interest expense Income tax expense

5,300 4,200 5,700 1,300 6,300 4,700 61,950

GENERAL JOURNAL Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Description Closing Entries Dec. 31 Income Summary Factory Overhead Date

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Page 1 Post Ref.

Debit

Credit

205,300.00 205,300.00 Page 31

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 31 Factory Overhead Income Summary

205,300.00

31 Sales Interest Revenue Income Summary

987,000.00 3,700.00

31 Income Summary Sales Returns and Allowances Cost of Goods Sold Wages Expense Supplies Expense Depreciation Expense—Office Equipment Utilities Expense Bad Debt Expense Advertising Expense Interest Expense Income Tax Expense

880,850.00

31 Income Summary Retained Earnings

109,850.00

31 Retained Earnings Cash Dividends

105,000.00

205,300.00

990,700.00

5,200.00 674,200.00 112,000.00 5,300.00 4,200.00 5,700.00 1,300.00 6,300.00 4,700.00 61,950.00

109,850.00

105,000.00

POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.130 - LO: 27-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 20 min. 64. Santiago Company has provided data for the year-end adjustments as follows: Factory overhead to be applied to work in process ending inventory Interest receivable Office supplies used Factory supplies used Provision for uncollectible accounts (based on percentage of sales) Insurance expired on factory building and equipment Depreciation on factory building Depreciation on factory equipment Cengage Learning Testing, Powered by Cognero

$14,687 1,554 5,807 8,611 11,734 2,734 16,490 6,608 Page 32

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements Required: Prepare the year-end adjusting entries in general journal form. GENERAL JOURNAL Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Description Adjusting Entries Dec. 31 Work in Process Inventory Factory Overhead Date

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Page 1 Post Ref.

Debit

Credit

14,687.00 14,687.00

31 Interest Receivable Interest Revenue

1,554.00

31 Office Supplies Expense Office Supplies

5,807.00

31 Factory Overhead Factory Supplies

8,611.00

1,554.00

5,807.00

8,611.00 Page 33

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements 31 Bad Debt Expense Allowance for Bad Debts

11,734.00

31 Factory Overhead Prepaid Insurance

2,734.00

31 Factory Overhead Accumulated Depreciation—Factory Building

16,490.00

31 Factory Overhead Accumulated Depreciation—Factory Equipment

6,608.00

11,734.00

2,734.00

16,490.00

6,608.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.130 - LO: 27-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 20 min. 65. From the adjusting entries below, prepare the reversing entry(ies) that would be needed for January 1. GENERAL JOURNAL Description Adjusting Entries Dec. 31 Work in Process Inventory Factory Overhead Date

Page 1 Post Ref.

Debit 17,333.00

17,333.00

31 Interest Receivable Interest Revenue

2,367.00

31 Office Supplies Expense Office Supplies

6,319.00

31 Factory Overhead Factory Supplies

15,841.00

31 Bad Debt Expense Allowance for Bad Debts

4,320.00

31 Factory Overhead Prepaid Insurance

1,927.00

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Credit

2,367.00

6,319.00

15,841.00

4,320.00

1,927.00 Page 34

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements

31 Factory Overhead Accumulated Depreciation—Factory Building

6,210.00

31 Factory Overhead Accumulated Depreciation—Factory Equipment

14,253.00

6,210.00

14,253.00

GENERAL JOURNAL Date

Page 1 Post Ref.

Description

Debit

Credit

ANSWER: GENERAL JOURNAL Description Date Reversing Entries Jan. 1 Factory Overhead Work in Process Inventory 1

Page 1 Post Ref.

Interest Revenue Interest Receivable

Debit

Credit

17,333.00 17,333.00 2,367.00 2,367.00

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.130 - LO: 27-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-27-Managerial Accounting Features/Costs KEYWORDS: Bloom's: Applying NOTES: 20 min. 66. From the data below for Wong Company, prepare the closing entries for the year ended December 31. Cash dividends Sales Sales returns and allowances Interest revenue Factory overhead (debit) Cengage Learning Testing, Powered by Cognero

$ 47,000 982,600 3,960 10,521 210,620 Page 35

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements Factory overhead (credit) Cost of goods sold Wages expense Supplies expense Depreciation expense—office equipment Utilities expense Bad debt expense Advertising expense Interest expense Income tax expense

210,620 726,820 130,745 9,900 6,900 5,840 1,680 11,120 9,860 32,050

GENERAL JOURNAL Date

Description

Page 1 Post Ref.

Debit

Credit

ANSWER: GENERAL JOURNAL Date Cengage Learning Testing, Powered by Cognero

Description Closing Entries

Page 1 Post Ref.

Debit

Credit Page 36

Chapter 27—Manufacturing Accounting: The Work Sheet and Financial Statements Dec. 31 Income Summary Factory Overhead

210,620.00

31 Factory Overhead Income Summary

210,620.00

31 Sales Interest Revenue Income Summary

982,600.00 10,521.00

938,875.00

31 Income Summary Retained Earnings

54,246.00

31 Retained Earnings Cash Dividends

47,000.00

210,620.00

993,121.00

3,960.00 726,820.00 130,745.00 9,900.00 6,900.00 5,840.00 1,680.00 11,120.00 9,860.00 32,050.00

54,246.00

47,000.00

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Module—Accounting for a Professional Service Business: The Combination Journal 1. Businesses might set up special journal columns for different accounts depending on the frequency of their use. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 2. Under the modified cash basis of accounting, adjustments are made only for prepaid items and depreciation on plant and equipment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.94 - LO: M-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 3. Posting from the combination journal to the general ledger must be done at the end of the month only. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 4. A journal with special and general columns is called a combination journal. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 5. Professional service business enterprises include attorneys, physicians, dentists, public accountants, artists, and educators. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.96 - LO: M-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 6. To be sure that the debits entered in the journal are equal to the credits, the journal must be posted. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 7. Adjusting and closing entries are made differently in the combination journal and in the general journal. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.94 - LO: M-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 8. Professional service enterprises include real estate, insurance, advertising, transportation, and various other firms. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.96 - LO: M-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 9. Seldom used accounts are entered in the General Debit column and the General Credit column of a special journal. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 10. If the owner has not made any additional investments during the period, the financial statements can be prepared directly from the work sheet. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.94 - LO: M-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 11. Each entry is posted individually from the General Debit column of the combination journal to the proper general ledger account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 12. Each entry is posted individually from the Cash Credit column of the combination journal to the proper general ledger account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 13. Financial statements are normally prepared at the end of the fiscal year. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.94 - LO: M-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 14. More time is required if a journal contains special columns for cash debits and cash credits. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 15. Many small professional service businesses use the modified cash basis of accounting. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.96 - LO: M-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 16. It will take additional work and time if a journal contains a special column for cash debits and one for cash credits. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 17. A journal with Debit and Credit columns for Cash, as well as General Debit and General Credit columns, is called a general journal. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 18. Amounts in the general columns of the combination journal are posted individually. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 19. Amounts in the special columns of the combination journal are posted individually. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 20. In using a combination journal, posting requires less time; however, the danger of making a posting error is increased. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 21. From the combination journal, the total of the Cash Debit column is posted as one amount to the credit side of the Cash account and the total of the Cash Credit column is posted as one amount to the debit side of the Cash account. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 22. Under the modified cash basis of accounting, no accounts receivable are entered in the accounting system. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.97 - LO: M-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 23. The cash balance may be computed at any time during the accounting period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 24. The debits and credits to Cash are not posted until the end of the accounting period. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 25. A type of business in which the principal source of revenue is compensation for services rendered to a business firm or to a person is a a. mercantile enterprise. b. manufacturing enterprise. c. professional service enterprise. d. retail enterprise. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.97 - LO: M-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 26. Accounting for revenue when no entry of revenue is made in the accounts until cash is received for the services performed is called a. matching basis revenue. b. cash basis expense. c. service basis accounting. d. modified cash basis. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.96 - LO: M-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 27. To record wages earned but not paid under the modified cash accounting method, a. debit Wages Payable and credit Wages Expense. b. debit Cash and credit Wages Expense. c. debit Wages Expense and credit Wages Payable. d. no entry is required. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.97 - LO: M-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 28. If a business records revenues when earned, regardless of whether cash has been received, and records expenses when they are incurred, the accounting system is a(n) a. accrual basis of accounting. b. cash basis of accounting. c. modified cash basis of accounting. d. revenue basis of accounting. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.96 - LO: M-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 29. To record the purchase of assets on account under the modified cash accounting method, a. no entry is required. b. debit the asset and credit Accounts Payable. c. debit the asset and credit Cash. d. debit Accounts Receivable and credit Accounts Payable. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.97 - LO: M-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 30. Professional service business enterprises include the following businesses EXCEPT a. accounting. b. real estate. c. dentistry. d. medicine. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.97 - LO: M-2 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 31. It is NOT necessary to post the total of which of the following columns to the related ledger accounts? a. the Cash Debit and Credit columns totals b. the Wages Expense Debit column total c. the General Debit and Credit column totals d. the Medical Supplies Debit column total ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 32. The column totals of the combination journal for Davis Manufacturing are: Cash Debit, $1,500; Cash Credit, $1,328.50; General Debit, $868.20; General Credit, $1,300. If the totals are correct, and the Wages Expense is the only other column, what must be the total of the Wages Expense Debit column? a. $171.50 b. $260.30 c. $431.80 d. $1,039.70 ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Applying NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 33. A journal with special and general columns is called a a. general journal. b. combination journal. c. two-column journal. d. business journal. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 34. Individual entries are posted from which of the following columns in the combination journal to the proper general ledger account? a. Post. Ref. column b. Date column c. Cash Credit column d. General Debit column ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 35. Which of the following would be placed in the "Post. Ref." column to indicate that the amount is not posted individually? a. the abbreviation "CJ" b. an "x" c. a dash d. a check mark ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 36. When an individual entry is posted from the combination journal to a ledger account, what information is entered in the "Post. Ref." column of the combination journal? a. the letters "CJ" b. the letters "CJ" and the page number c. the letters "CJ" and the invoice number d. the account number ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 37. When an individual entry is posted from the combination journal to a ledger account, what information is entered in the "Post. Ref." column of the ledger account? a. the letters "CJ" b. the letters "CJ" and the page number c. the letters "CJ" and the invoice number d. the letters "CJ" and the year ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 38. Which of the following is the proper sequence for end-of-the-month work with the combination journal? a. complete the individual postings, total and rule the columns, prove the journal, complete the summary postings b. prove the journal, total and rule the columns, complete the individual posting, complete the summary postings c. total and rule the columns, complete the individual postings, complete the summary postings, prove the journal d. total and rule the columns, complete the summary postings, complete the individual postings, prove the journal ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 39. Which of the following amounts should NOT be posted to any ledger account? a. the total of the Cash Credit column b. the total of the Professional Fees column c. the total of the Supplies Expense column d. the total of the General Debit and Credit column ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 40. The debits and credits to Cash in the combination journal are posted a. daily. b. weekly. c. at the end of the accounting period. d. after each cash transaction. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 41. Once an amount has been posted to the general ledger account from the combination journal, what is entered in the "Post. Ref." column of the combination journal? a. the abbreviation "CJ" b. your initials c. a check mark d. the account number ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 42. The amounts in the general columns of the combination journal should be posted a. daily. b. weekly. c. at the end of the accounting period. d. whenever there is time. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 43. Once the total of a special column has been posted, what is written under the total of the column in the journal? a. a check mark b. the account number c. the abbreviation "CJ" d. the date ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 44. End-of-period activities include all of the following EXCEPT a. adjusting entries. b. closing entries. c. a work sheet. d. appointment records. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.94 - LO: M-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 45. A cash balance may be computed a. daily. b. weekly. c. at the end of the accounting period. d. whenever desired. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 46. The end-of-period work sheet is used to facilitate a. preparing financial statements. b. posting the special journal. c. updating appointment records. d. recording transactions in the general ledger. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.94 - LO: M-5 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 47. In the columns below, insert the entry that would be made for each transaction under each accounting basis, using appropriate debit and credit account titles. 1. 2. 3. 4. 5.

Performed services on account. Supplies are partly used. Purchased one-year insurance policy for cash. Received bill for electricity. Depreciation on equipment.

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Module—Accounting for a Professional Service Business: The Combination Journal 6. 7. 8. 9. 10.

Purchased equipment on account. Paid cash for wages. Paid for equipment purchased on account. Performed services for cash. Paid cash for new equipment. Modified Cash Basis

Accrual Basis

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Modified Cash Basis no entry

Accrual Basis Accounts Receivable Professional Fees

Supplies Expense Supplies

Prepaid Insurance Cash

no entry

Utilities Expense Accounts Payable

Depr. Exp.—Equipment Accum. Depr.—Equip.

Equipment Accounts Payable

Wages Expense

ANSWER: 1.

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Module—Accounting for a Professional Service Business: The Combination Journal Cash

Cash

Accounts Payable Cash

Cash Professional Fees

10.

Equipment Cash

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.96 - LO: M-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 5 min. 48. Journalize Fred Buchanan's July transactions using the combination journal provided. Prove the journal. Fred uses the modified cash basis for his accounting records. July 1 2 3 7 10 15 17 22 27 29

Fred Buchanan invested $100,000 in his business. Borrowed $50,000 from the bank. Received $1,100 cash from customers. Bought supplies on account, $750. Paid part-time receptionist $1,300. Paid advertising bill $1,500. Purchased $14,000 of office furniture paying $4,000; the balance on account. Billed credit customers, $4,500. Received $1,000 from credit customers. Received $5,500 from cash customers.

CASH Post GENERAL Fees Supplies Day Debit Credit Description Ref. Debit Credit Credit Debit

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Module—Accounting for a Professional Service Business: The Combination Journal

ANSWER: CASH Day

Debit

Post

Credit

7 10 15 17

27 29

Ref.

Debit

F.Buchanan, Cap. Notes Payable

1 100,000 2 3

Description

GENERAL

50,000 1,100

Credit

Fees

Supplies

Credit

Debit

100,000 50,000 1,100

Accts. Payable Wages 1,300 Expense Adv. 1,500 Expense 4,000 Office Furn. Accts. Payable 1,000 5,500 _____ 157,600 6,800

Debits Credits Cash 157,600 Cash General 16,800 General Supplies 750 Fees Totals 175,150 Totals POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Applying NOTES: 10 min.

750

1,300 1,500 14,000 10,000 ______ _______ 16,800 160,750

1,000 5,500 7,600

___ 750

6,800 160,750 7,600 175,150

49. The combination journal for Dr. Sandra Akins' medical practice for the month of June is as follows: Cengage Learning Testing, Powered by Cognero

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Module—Accounting for a Professional Service Business: The Combination Journal

Day 1 2 3 4 5 6 7 8 9 15 15 16 17 19 20 22 23 24 25 27 30 30

COMBINATION JOURNAL

For the month of Page 1

CASH Debit Credit Description 75,000 Akins, Capital 1,500 Prepaid Insurance 32,000 Medical Equipment 500 Office Furniture Accts. Pay.—Jay 4,000 1,500 Rent Expense 2,500 250 150 Telephone Expense 12,000 312 2,500 150 2,800 2,000 Accts. Pay.—Jay 200 400 Office Furniture 500 Accts. Pay.—Jay 2,500 6,500 _______ 10,000 Akins, Drawing 100,300 56,962

Post. Ref. 311 145 185 -182 202 -521 --525 -----202 --182 202 --312

(101)

Day < < < < < < < < <

1 2 3 4 5 6 7

9,000

1,500

150

2,000

3,500

10,000 59,650 (√)

(101)

MEDICAL WAGES FEES EXPENSE CREDIT DEBIT

GENERAL Debit Credit 75,000 1,500 32,000

LAB EXPENSE DEBIT

MEDICAL SUPPLIES DEBIT

> > > > > > 9,000 > > > > > > > > > > > > > > > 3,000 > > > ______ > 87,000 > (√)

OFFICE SUPPLIES DEBIT

500

4,000

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Module—Accounting for a Professional Service Business: The Combination Journal < < < < < < < < < < < < < < < <

8 9 15 15 16 17 19 20 22 23 24 25 27 30 30

< <

2,500 250 12,000 312 2,500 150 2,800 200 400

2,500 6,500 ______ 25,300 (401)

_____ 7,500 (511)

_____ 1,212 (526)

___ 450 (141)

___ 150 (142)

Required: 1. Prove the journal. 2. Set up T accounts. Post the combination journal to the ledger T accounts (posting references have been made in the combination journal). ANSWER:

1. PROOF Debit Credit 100,300 56,962 59,650 87,000 7,500 25,300 1,212 450 150 _______ 169,262 169,262 2. Cash 100,300

Medical Supplies

Acct. No. 101 56,962

Acct. No. 141 450

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Module—Accounting for a Professional Service Business: The Combination Journal Office Supplies

Acct. No. 142 150

Prepaid Insurance

Acct. No. 145 1,500

Office Furniture

Acct. No. 182 9,000 3,500

Medical Equip.

Acct. No. 185 32,000

Accounts Payable 2,000

Akins, Capital

Acct. No. 202 9,000 3,000

Acct. No. 311 75,000

Akins, Drawing

Acct. No. 312 10,000

Medical Fees

Acct. No. 401 25,300

Wages Expense

Acct. No. 511

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Module—Accounting for a Professional Service Business: The Combination Journal 7,500

Rent Expense

Acct. No. 521 1,500

Telephone Expense

Acct. No. 525 150

Lab Expense

Acct. No. 526 1,212

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Applying NOTES: 20 min. 50. Record the following transactions for K-9 Kennel and Grooming Salon in a combination journal using the modified cash basis of accounting. Total, rule, and prove the combination journal. May 1 2 4 7 8 15 15 17 18 21 24 25

Purchased shampoo supplies for $322 on account. Paid rent, $1,250. Cash received from customers for the week, $2,000. Purchased office equipment for $1,670. Paid $500 down and the remainder on account. Paid the telephone bill, $89. (Utility expense) Paid wages, $2,780. Billed credit customers, $3,250. Owner, K. Kennel, withdrew $1,000 cash for personal use. Paid for a one-year liability insurance policy, $1,250. Paid bill for shampoo supplies purchased on May 1. Cash received from customers for the week, $1,942. Paid for the office equipment bought on account.

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Module—Accounting for a Professional Service Business: The Combination Journal 27 29 31

Billed credit customers, $2,270. Received electric bill, $244. Received $2,930 from credit customers.

COMBINATION JOURNAL

For the month of May

CASH Debit Credit

Post. Ref.

Day

< Day

Description

GROOMING FEES SUPPLIES CREDIT DEBIT

Page 1

GENERAL Debit Credit

WAGES EXPENSE DEBIT

> > > > > > > > > > > > > > > > > >

UTILITIES EXPENSE DEBIT

< < < < < < < < < < < < < < < ANSWER: COMBINATION JOURNAL Cengage Learning Testing, Powered by Cognero

For the month of May

Page 1 Page 31

Module—Accounting for a Professional Service Business: The Combination Journal

Day

CASH Debit Credit

Description

Post. Ref.

GENERAL Debit Credit

Accounts Payable

2 4 7

322

1,250 Rent Expense

1,250

500 Office Equip.

1,670

89 2,780

1,000 K. Kennel, Draw.

1,250 Prepaid Ins.

2,930 _____ 6,872

_____ 8,361

1 4

1,000 1,250

> >

322

SUPPLIES DEBIT 322

WAGES EXPENSE DEBIT

_____ 1,492

> > >

UTILITIES EXPENSE DEBIT

2,000

89 2,780

1,942

2,930 6,872

PROOF Debit

1,170 _____ 6,662

8 15

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Accounts Payable

GROOMING FEES CREDIT

Day

> 1,170

< < < < < < < < < < < < < <

1,170

1,942

25 31

Accounts Payable

322

> >

8 15

> > >

2,000 Accounts Payable

___ 322

_____ 2,780

__ 89

Credit Page 32

Module—Accounting for a Professional Service Business: The Combination Journal 6,872 6,662 322 2,780 89 16,725

8,361 1,492 6,872 ______ 16,725

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Applying NOTES: 20 min. 51. Ryan Honeycutt is opening a new dental practice. Journalize the following transactions in a combination journal. Use the modified cash basis. Total, rule, and prove the journal. Feb. 1 2 3 4 15 17 22 27 28 28

Invested $45,000 in the practice. Purchased $300 of dental supplies on account. Paid $2,000 for a one-year liability insurance policy. Purchased $1,000 of dental equipment on account. Paid receptionist wages, $500. Billed clients, $1,600. Received $300 from clients previously billed. Paid telephone bill, $150. Received February electric bill, $75. Wages owed to receptionist for the last two weeks of February, $500 to be paid in March. COMBINATION JOURNAL

Day

CASH Debit Credit

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For the month of

Description

Page 1

Post GENERAL Ref. Debit Credit

> > > > > > > > > > > > Page 33

Module—Accounting for a Professional Service Business: The Combination Journal > > < < < < < < < < < <

Day

DENTAL FEES CREDIT

WAGES EXPENSE DEBIT

ACCOUNTS PAYABLE Debit Credit

ANSWER:

COMBINATION JOURNAL

For the month of FEBRUARY

CASH Debit Credit 45,000

Day 1 2 3 4 15 22 300 27 ______ 45,300

< < < < < < < <

Description Honeycutt, Capital Dental Supplies 2,000 Prepaid Insurance Dental Equipment 500 150 Telephone Expense 2,650

DENTAL FEES CREDIT

Day 1 2 3 4 15 22 27

WAGES EXPENSE DEBIT

Page 1

Post. GENERAL Ref. Debit Credit 45,000 300 2,000 1,000

150 ______ 3,450 45,000

> > > > > > > > > >

ACCOUNTS PAYABLE Debit Credit 300 1,000

500 300 ___ 300

___ 500

_____ 1,300

PROOF Cengage Learning Testing, Powered by Cognero

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Module—Accounting for a Professional Service Business: The Combination Journal Debit 45,300 3,450 500 ______ 49,250

Credit 2,650 45,000 300 1,300 49,250

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Applying NOTES: 20 min. 52. In the columns below, insert the entry that would be made for each transaction under each accounting basis, using appropriate debit and credit account titles. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Purchased equipment on account. Paid cash for new equipment. Purchased one-year insurance policy for cash. Received bill for electricity. Performed services for cash. Performed services on account. Paid cash for wages. Paid for equipment purchased on account. Depreciation on equipment. Supplies are partly used. Modified Cash Basis

Accrual Basis

1. 2. 3. 4. 5. 6. 7. Cengage Learning Testing, Powered by Cognero

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Module—Accounting for a Professional Service Business: The Combination Journal 8. 9. 10. Modified Cash Basis Equipment Accounts Payable

Accrual Basis Equipment Accounts Payable

Equipment Cash

Prepaid Insurance Cash

no entry

Utilities Expense Accounts Payable

Cash Service Fees

no entry

Accounts Receivable Service Fees

Wages Expense Cash

Accounts Payable Cash

Depreciation Expense Accum. Depr.—Equip.

10.

Supplies Expense Supplies

ANSWER: 1.

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: COLL.HEIN.17.96 - LO: M-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Applying Cengage Learning Testing, Powered by Cognero

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Module—Accounting for a Professional Service Business: The Combination Journal NOTES:

20 min.

53. Joe Maxwell is opening a new accounting practice. Journalize the following transactions in a combination journal. Use the modified cash basis. Total, rule, and prove the journal. April 1 2 3 4 15 17 22 27 28 30

Invested $75,000 in the practice. Purchased $500 of office supplies on account. Paid $1,500 for a three-year insurance policy. Purchased $10,000 of computer equipment on account. Paid receptionist wages, $500. Billed clients, $1,600. Received $300 from clients previously billed. Paid telephone bill, $150. Received April electric bill, $75. Wages owed to receptionist for the last two weeks of April, $500 to be paid in March. COMBINATION JOURNAL

Day

CASH Debit Credit

SERVICE FEES CREDIT

Description

WAGES EXPENSE DEBIT

For the month of Post Ref.

Page 1

GENERAL Debit Credit

> > > > > > > > > > > > > >

UTILITIES EXPENSE DEBIT

< < < < < < < < < < < Cengage Learning Testing, Powered by Cognero

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Module—Accounting for a Professional Service Business: The Combination Journal < ANSWER: COMBINATION JOURNAL

Day 1 2

CASH Debit Credit

300 ______ 75,300

< < < < < < < < < <

Description

Day

GENERAL Debit Credit 75,000

Office Supplies Accounts Payable 1,500 Prepaid Insurance Computer Equipment Accounts Payable 500

1,500 10,000

150 2,150

______ ______ 12,000 85,500

SERVICE FEES CREDIT

Post. Ref.

Page 1

Joe Maxwell, Capital

75,000

3 4 15 22 27

For the month of APRIL

WAGES EXPENSE DEBIT

500 500

10,000

> > > > > > > > > > > >

UTILITIES EXPENSE DEBIT

1 2 3 4 15 22 27

500 300 ___ 300

< PROOF Debit 75,300 12,000 500 150 87,950

___ 500

150 150

Credit 2,150 85,500 300 ______ 87,950

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting Cengage Learning Testing, Powered by Cognero

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Module—Accounting for a Professional Service Business: The Combination Journal

TOPICS:

KEYWORDS: NOTES:

BUSPROG: Analytic ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual Bloom's: Applying 15 min.

54. Mark Johnson opened a delivery service. His chart of accounts is shown below. Assets 101 142 185

Cash Office Supplies Delivery Equipment

Liabilities 202

Accounts Payable

Owner's Equity 311

Mark Johnson, Capital

Revenue 401

Delivery Fees

Expenses 511 521 533

Wages Expense Rent Expense Utilities Expense

Jan. 2 3 5 6 7 8 11 13 14

Paid shop rental for the month, $400. Purchased a delivery car from Wally's Wrecks on account, $1,000. Purchased office supplies for cash, $250. Paid the telephone bill (utilities), $51. Paid part-time employee, $265. Received cash for delivery services, $1,428. Paid electricity bill (utilities), $37. Made payment on account for delivery car previously purchased, $250. Paid part-time employee, $280.

Required: 1. Journalize the above transactions that occurred in January, 20--. Use the modified cash basis and the combination journal provided. 2. Prove the combination journal. 3. Post to the general ledger. COMBINATION JOURNAL

Page 1 DELIVERY WAGES CASH Post GENERAL FEES EXPENSE Date Debit Credit Description Ref. Debit Credit CREDIT DEBIT Cengage Learning Testing, Powered by Cognero

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Module—Accounting for a Professional Service Business: The Combination Journal

Proving the Combination Journal

GENERAL LEDGER Account Cash Date Jan. 1

Item Balance

Post Ref. Debit

Credit

Account Office Supplies Date Jan. 1

Item Balance

Post Ref.

Account Delivery Equipment Post Date Item Ref.

Debit

Credit

Account Accounts Payable Date Jan.

Item Balance

Post Ref. Debit

Cengage Learning Testing, Powered by Cognero

Credit

Account No. 101 Balance Debit Credit 2,675.00

Account No. 142 Balance Debit Credit 135.00

Account No. 185 Balance Debit Credit

Account No. 202 Balance Debit Credit 110.00

Page 40

Module—Accounting for a Professional Service Business: The Combination Journal

Account Mark Johnson, Capital Post Date Item Ref. Jan. 1 Balance

Debit

Credit

Account Delivery Fees Date

Item

Post Ref.

Debit

Credit

Account No. 401 Balance Debit Credit

Credit

Account No. 511 Balance Debit Credit

Credit

Account No. 521 Balance Debit Credit

Credit

Account No. 533 Balance Debit Credit

Account Wages Expense Date

Item

Post Ref.

Debit

Account Rent Expense Date

Item

Post Ref.

Debit

Account Utilities Expense Date

Item

Post Ref.

Debit

Account No. 311 Balance Debit Credit 2,700.00

ANSWER: COMBINATION JOURNAL

Date Jan. 2

CASH Debit Credit

Post Description Ref. Rent 400.00 Expense 521 Delivery Equipment 185 Accounts Payable 202 Office 250.00 Supplies 142 Utilities 51.00 Expense 533 265.00

5 6 7 8 11 Cengage Learning Testing, Powered by Cognero

Page 1

533

> >

400.00

1,000.00 1,000.00 250.00 51.00

> > > > >

1,428.00 Utilities 37.00 Expense

GENERAL Debit Credit

37.00

> Page 41

Module—Accounting for a Professional Service Business: The Combination Journal Accounts 13 250.00 Payable 14 ________ 280.00 1,428.00 1,533.00 (101) (101)

DELIVERY FEES CREDIT

< Date < < < < < < < < < < <

202

250.00 ________ ________ 1,988.00 1,000.00 (√) (√)

> > > > >

WAGES EXPENSE DEBIT

Jan. 2 3 5 6 7 8 11 13 14

< < <

265.00 1,428.00

________ 1,428.00

280.00 545.00

(401)

(511)

Proving the Combination Journal: Cash Debit General Debit Wages Expense Debit Debit Total

1,428 1,988 545 3,961

Cash Credit General Credit Delivery Fees Credit Credit Total

1,533 1,000 1,428 3,961

GENERAL LEDGER Account Cash Date Jan. 1 31 31

Item Balance

Post Ref. CJ1 CJ1

Debit 1,428.00

Account No. 101 Balance Credit Debit Credit 2,675.00 4,103.00 1,533.00 2,570.00

Account Office Supplies Date Jan. 1 5

Item Balance

Account Delivery Equipment Cengage Learning Testing, Powered by Cognero

Post Ref.

Debit

CJ1

250.00

Credit

Account No. 142 Balance Debit Credit 135.00 385.00 Account No. 185 Page 42

Module—Accounting for a Professional Service Business: The Combination Journal

Date Jan. 3

Item

Post Ref. CJ1

Debit Credit 1,000.00

Account Accounts Payable Date Item Jan. 1 Balance 3 13

Post Ref. Debit CJ1 CJ1

Account Mark Johnson, Capital Post Date Item Ref. Jan. 1 Balance

Credit 1,000.00

250.00

Debit

Credit

Account Delivery Fees Date Jan. 31

Item

Post Ref. CJ1

Date Jan. 31

Item

Date Jan. 2

Item

Credit 545.00

Account No. 511 Balance Debit Credit 545.00

Debit Credit 400.00

Account No. 521 Balance Debit Credit 400.00

Debit Credit 51.00 37.00

Account No. 533 Balance Debit Credit 51.00 88.00

Debit

Account Utilities Expense Date Jan. 6 11

Item

Post Ref. CJ1 CJ1

Account No. 311 Balance Debit Credit 2,700.00

Credit 1,428.00

Debit

Account Rent Expense Post Ref. CJ1

Account No. 202 Balance Debit Credit 110.00 1,110.00 860.00

Account No. 401 Balance Debit Credit 1,428.00

Account Wages Expense Post Ref. CJ1

Balance Debit Credit 1,000.00

POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Analytic TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual Cengage Learning Testing, Powered by Cognero

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Module—Accounting for a Professional Service Business: The Combination Journal KEYWORDS: NOTES:

Bloom's: Applying 30 min.

55. The ____________________ is a method of accounting that combines aspects of the cash and accrual methods. It uses the cash basis for recording revenues and most expenses. Exceptions are made when cash is paid for assets with useful lives greater than one accounting period. ANSWER: modified cash basis POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.96 - LO: M-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 56. A(n) ____________________ is a journal with special and general columns. ANSWER: combination journal POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Page 44

Module—Accounting for a Professional Service Business: The Combination Journal 57. ____________________ are meant for frequently used accounts. ANSWER: Special columns POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 58. The ____________________ column in the combination journal is used to credit accounts that are used infrequently. ANSWER: General Credit POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 59. The ____________________ is a method of accounting under which revenues are recorded when cash is received and expenses are recorded when cash is paid. ANSWER: cash basis of accounting POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. Cengage Learning Testing, Powered by Cognero

Page 45

Module—Accounting for a Professional Service Business: The Combination Journal 60. The column in the combination journal where the account number is entered after posting is the ____________________. ANSWER: Posting Reference column POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.95 - LO: M-4 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 61. The ____________________ column in the combination journal is used to enter the account titles for the General Debit and General Credit columns, identify specific creditors when assets are purchased on account, and identify amounts forwarded. ANSWER: description POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min.

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Module—Accounting for a Professional Service Business: The Combination Journal 62. The ____________________ column in the combination journal is used to debit accounts that are used infrequently. ANSWER: General Debit POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: COLL.HEIN.17.93 - LO: M-3 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. Match the terms with the definitions. a. accrual basis of accounting b. combination journal c. Description column d. General Credit column e. General Debit column f. modified cash basis g. Posting Reference column h. special columns DIFFICULTY: LEARNING OBJECTIVES:

Easy COLL.HEIN.17.93 - LO: M-3 COLL.HEIN.17.96 - LO: M-1 ACCREDITING STANDARDS: AICPA FN-Measurement AICPA FN-Reporting BUSPROG: Communication TOPICS: ACBSP: APC-18-Special Journals ACBSP: APC-03-Business Forms ACBSP: APC-04-Cash vs. Accrual KEYWORDS: Bloom's: Remembering NOTES: 1 min. 63. A journal with special and general columns. ANSWER: b POINTS: 1 64. Columns in journals for frequently used accounts. ANSWER: h POINTS: 1 Cengage Learning Testing, Powered by Cognero

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Module—Accounting for a Professional Service Business: The Combination Journal 65. A method of accounting that combines aspects of the cash and accrual methods. It uses the cash basis for recording revenues and most expenses. Exceptions are made when cash is paid for assets with useful lives greater than one accounting period. ANSWER: f POINTS: 1 66. A method of accounting under which revenues are recorded when earned and expenses are recorded when incurred. ANSWER: a POINTS: 1 67. The column in the combination journal where the account number is entered after posting. ANSWER: g POINTS: 1 68. The column in the combination journal used to debit accounts that are used infrequently. ANSWER: e POINTS: 1 69. The column in the combination journal used to enter the account titles for the General Debit and General Credit columns, to identify specific creditors when assets are purchased on account, and to identify amounts forwarded. ANSWER: c POINTS: 1 70. The column in the combination journal used to credit accounts that are used infrequently. ANSWER: d POINTS: 1

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