71. What is the effect on the financial statements when a company fails to accrue revenue earned at year-end?  A. Net income is understated and assets are understated. B. Revenue is understated and stockholders’ equity is overstated. C. Revenue is understated and assets aren’t affected. D. Net income is understated and liabilities are overstated. 72. On December 31, 2011, Krug Company reported pretax income of $120,000 prior to the following […]

    Learning Objective 5-1   1) The operating cycle for a merchandising firm is ________. A) obtain cash from stockholders, invest cash in equipment, earn more cash B) borrow cash from lenders, earn cash from customers, repay lenders C) start with cash, buy inventory, sell inventory to customers, collect cash from customers D) issue stock to owners, earn a profit, pay dividends to owners […]

    131.During the current year, Atkins, Inc. sold a parcel of land for $840,000 cash. The land had been purchased by Atkins several years ago for $410,000. Atkins, Inc. uses the indirect method to prepare its statement of cash flows. In order to reconcile net income to net cash flow from operating activities, net income must be:    A. Decreased by $410,000.   B. Decreased by $430,000. […]

    102. During the period, labor costs incurred on account amounted to $250,000 including $200,000 for production orders and $50,000 for general factory use. In addition, factory overhead charged to production was $23,000. From the following, select the entry to record the direct labor costs.  A. Work in Process                  200,000    Wages Payable                                       200,000 B. Work in Process                  250,000    Wages Payable                                       250,000 C. Wages Payable                   250,000   Work in Process                                       250,000 D. Wages […]

  21) When the investment is readily convertible to cash and the investor plans to convert the investment to cash within one year, the investment is shown on the balance sheet as: A) short-term. B) long-term. C) equity. D) either long-term or short-term.   22) The following is the proper order for assets on a balance sheet: A) Cash, intangibles, inventories, and long-term investments. B) […]

    41. A(n) _____ entry is used to record the effects of an event or transaction that was not previously recorded.   A. correcting B. reversing C. closing D. adjusting E. t-account   42. A _____ is used to record properly the effects of an event or transaction that was improperly recorded during the accounting period.  A. reversing entry B. preliminary entry C. closing entry D. correcting entry E. none of the above   43. _____ accounts […]

  153.Trimble Company began business on July 1. They use the perpetual inventory method. The following transactions involving purchases and cash disbursements occurred during the first week of July.   July 4Purchased $25,000 of merchandise inventory on credit from the Fort City Company, terms 2/10, n/30. Invoice dated July 1. July 5Purchased $12,000 of merchandise inventory on credit from the Phoenix Company, terms 2/10, n/30. […]

    38. The basic purpose of an audit is to:  A. Assure financial statements are in conformity with GAAP. B. Provide as much useful information to decision makers as possible, regardless of cost. C. Record changes in the financial position of an organization by applying the concepts of double entry accounting. D. Meet an organization’s need for accounting information as efficiently as possible.   39. The accounting systems of most […]

  26) M. Smuts showed a net income of $6,000. The entry to close the Income Summary account would include a: A) debit to M. Smuts Capital, $6,000. B) credit to M. Smuts Capital, $6,000. C) debit to Income Summary, $6,000. D) Both B and C are correct.   27) J. Oros showed a net loss of $3,200. The entry to close the Income Summary […]

  33. Peacock Company sells its product for $100 per unit. The company’s accountant provided the following cost information:    What is Peacock Company’s contribution margin ratio?  A. 60% B. 70% C. 30% D. 40% 34. Zero, Inc. produces a product that has a variable cost of $7.00 per unit. The company’s fixed costs are $40,000. The product sells for $12.00 a unit and the company desires to earn a $20,000 […]