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principles of financial accounting
Questions and Answers of
Principles Of Financial Accounting
Which of the following statements about merchandising activities is true? (More than one answer may be correct.)a. As inventory is purchased, the Inventory Expense account is debited and Cash (or
Marietta Corporation uses a perpetual inventory system. All of its sales are made on account. The company sells merchandise costing $3,000 at a sales price of $4,300. In recording this transaction,
Fashion House uses a perpetual inventory system. At the beginning of the year, inventory amounted to \($50,000\). During the year, the company purchased merchandise for \($230,000\) and sold
Best Hardware uses a periodic inventory system. Its inventory was \($38,000\) at the beginning of the year and \($40,000\) at the end. During the year, Best made purchases of mer- chandise totaling
The two basic approaches to accounting for inventory and the cost of goods sold are the perpetual inventory system and the periodic inventory system. Indicate which of the following statements are
Big Brother, a retail store, purchased 100 television sets from Krueger Electronics on account at a cost of \$200 each. Krueger offers credit terms of \(2 / 10, n / 30\). Big Brother uses a perpetual
Two of the lawn mowers sold by Garden Products Co. are the LawnMaster and the Mark 5. LawnMasters sell for \$250 apiece, which results in a 35 percent gross profit margin. Each Mark 5 costs Garden
For a publicly owned company, indicate which of the following accounting activities are likely to occur at or shortly after year-end. (More than one answer may be correct.)a. Preparation of income
Which of the following accounts would never be reported in the income statement as an expense?a. Depreciation expense.b. Income taxes expense.c. Interest expense.d. Dividends expense.
Which of the following journal entries is required to close the Income Summary account of a profitable company?a. Debit Income Summary, credit Retained Earnings.b. Credit Income Summary, debit
Indicate those items for which generally accepted accounting principles require disclosure in notes accompanying the financial statements. (More than one answer may be correct.)a. A large lawsuit was
Ski West adjusts its accounts at the end of each month but closes them only at the end of the calendar year (December 31). The ending balances in the Equipment Rental Revenue account and the Cash
Which of the following accounts is not closed to the Income Summary account at the end of the accounting period? (More than one answer may be correct.)a. Rent Expense.b. Accumulated Depreciation.c.
The purpose of adjusting entries is to:a. Adjust the Retained Earnings account for the revenue, expense, and dividends recorded during the accounting period.b. Adjust daily the balances in asset,
Before month-end adjustments are made, the January 31 trial balance of Rover Excursions contains revenue of \($27,900\) and expenses of \($17,340\). Adjustments are necessary for the following items:
The CPA firm auditing Mason Street Recording Studios found that total stockholders' equity was understated and liabilities were overstated. Which of the following errors could have been the cause?a.
Assume Fisher Corporation usually earns taxable income, but sustains a loss in the current period. The entry to record income taxes expense in the current period will most likely (indicate all
The concept of materiality (indicate all correct answers):a. Requires that financial statements be accurate to the nearest dollar, but need not show cents.b. Is based upon what users of financial
According to the rules of debit and credit for balance sheet accounts:a. Increases in asset, liability, and owners' equity accounts are recorded by debits.b. Decreases in asset and liability accounts
Sunset Tours has a \($3,500\) account receivable from the Del Mar Rotary. On January 20, the Rotary makes a partial pay- ment of \($2,100\) to Sunset Tours. The journal entry made on January 20 by
Indicate all of the following statements that correctly describe net income. Net income:a. Is equal to revenue minus expenses.b. Is equal to revenue minus the sum of expenses and dividends.c.
Which of the following is provided by a trial balance in which total debits equal total credits?a. Proof that no transaction was completely omitted from the ledger during the posting process.b. Proof
Which of the following explains the debit and credit rules relating to the recording of revenue and expenses?a. Expenses appear on the left side of the balance sheet and are recorded by debits;
Which of the following is not considered an analytical aspect of the accounting profession?a. Evaluating an organization's operational efficiency.b. Forecasting the probable results of future
Indicate all correct answers. In the accounting cycle:a. Transactions are posted before they are journalized.b. A trial balance is prepared after journal entries have been posted.c. The Retained
Indicate all correct answers. Dividends:a. Decrease owners' equity.b. Decrease net income.c. Are recorded by debiting the Dividend account.d. Are a business expense.
Waterworld Boat Shop purchased a truck for \(\$ 12,000\), making a down payment of \(\$ 5,000\) cash and signing a \(\$ 7,000\) note payable due in 60 days. As a result of this transaction:a. Total
A transaction caused a \(\$ 15,000\) decrease in both total assets and total liabilities. This transaction could have been:a. Purchase of a delivery truck for \(\$ 15,000\) cash.b. An asset with a
Which of the following is (are) correct about a company's balance sheet?a. Displays sources and uses of cash for the period.b. Is an expansion of the basic accounting equation: Assets = Liabilities +
Which of the following would you expect to find in a correctly prepared income statement?a. Cash balance at the end of the period.b. Revenues earned during the period.c. Contributions by the owner
What information would you find in a statement of cash flows that you would not be able to get from the other two primary financial statements?a. Cash provided by or used in financing activities.b.
To understand and use accounting information in making economic decisions, you must understand:a. The nature of economic activities that accounting information describes.b. The assumptions and
Purposes of an accounting system include all of the following except:a. Interpret and record the effects of business transactions.b. Classify the effects of transactions to facilitate the preparation
Financial accounting information is characterized by all of the following except.a. It is historical in nature.b. It sometimes results from inexact and approximate measures.c. It is factual, so it
Which of the following is not a user of internal accounting information?a. Store manager.b. Chief executive officer.c. Creditor.d. Chief financial officer.
Characteristics of internal accounting information include all of the following except:a. It is audited by a CPA.b. It must be timely,c. It is oriented toward the future.d. It measures efficiency and
Which of the following are important factors in ensuring the integrity of accounting information?a. Institutional factors, such as standards for preparing information.b. Professional organizations,
The code of conduct of the American Institute of Certified Public Accountants includes requirements in which of the following areas?a. The Public Interest.c. Independence.b. Objectivity.d. All of the
Open the following T accounts: Cash; Repair Supplies; Repair Equipment; Accounts Payable; T. Ornega, Capital; Withdrawals; Repair Fees Earned; Salaries Expense; and Rent Expense. Record the following
Record in \(\mathrm{T}\) account form each of the following transactions, assuming the perpetual inventory system is used: Aug. 2 Purchased merchandise on credit from Indio Company, invoice dated
Record in \(\mathrm{T}\) account form the following transactions, assuming the periodic inventory system is used: Aug. 4 Sold merchandise on credit to Rivera Company, terms n/30, FOB destination,
The management of Posad Cotton Company made the decisions that follow. Indicate whether each decision pertains primarily to (a) cash flow management, (b) choice of inventory system, or (c) foreign
A household appliance dealer buys refrigerators from a manufacturer and resells them to its customers.a. The manufacturer sets a list or catalogue price of \(\$ 2,500\) for a refrigerator. The
Given the following transactions engaged in by Stanford Company, prepare journal entries and, assuming the periodic inventory system, determine the total amount received from Penkas Company. Mar. 1
Lien Company engaged in the following transactions:Prepare journal entries and, assuming the perpetual inventory system, determine the total amount paid to Jonak Company. July 2 Purchased merchandise
The total assets and liabilities at the beginning and end of the year for Schupan Company are listed below.Determine Schupan Company's net income or loss for the year under each of the following
Which form of financing allows the source of the funds to share in the wealth if the company which received the financing does well?a. A loanb. An investmentc. Both a loan and an investmentd. Neither
Which form of financing requires repayment, regardless of whether the company receiving the funds does well or not?a. A loanb. An investmentc. Both a loan and an investmentd. Neither a loan nor an
What are vertical and horizontal financial statement analyses? What are their advantages?
Which one of the following costs is not included in inventory for manufacturing firms?a. Raw materials used in productionb. Raw materials unused and stored in the warehousec. Salary paid to the
Stevenson Company's trial balance as of December 31, 2022 shows \($35,000\) for inventory; but the balance sheet shows \($33,000.\) Assuming no inventory shrinkage, what is the most likely reason for
Amanda Company started business at the beginning of 2022. The company applies the lower-of-cost- or-net-realizable-value rule to its inventory as a whole. Inventory cost and market value as of the
On June 24, 2022, Reed Company sold merchandise to Emily Clark for \(£ 75,000\). On June 30, Clark paid \(£ 40,000\).Assuming that Reed uses the perpetual inventory system, record the necessary
Assume an employee earns $900 per day and accrues one sick leave each month. Make the journal entry necessary at the end of the quarter to record the accrual of the sick leaves during the quarter.
Gordon Inc. adopts a defined contribution pension plan, which requires Gordon Inc. to contribute NT$250,000 for February 2022. Prepare a journal entry for the payment.
Joyce Company adopts a defined benefit plan for its employees as a post-retirement benefit. According to the plan and the actuarial assumptions, the pension expense is NT\($200,000,\) and Joyce only
Why is preparing bank reconciliation an internal control procedure?
Smith Company establishes a petty cash fund. Explain the purposes of doing So.
At the beginning of this month, Friedman Company established a petty cash fund with the amount of \($10,000.\) At the end of this month, it was found that the balance of this fund was \($490,\) but
Shiller Company received a bank statement showing the account balance $268,500, which is different from the amount shown in Shiller's general ledger. The following events account for the discrepancy
Lucas Company had the following transactions in March:a. Purchasing inventory on accountb. Borrowing cash from a bankC. Cash sales of merchandised. Disposal of a trucke. Paying employees'
Sargent Company is a medium-sized merchandising firm. Below are the company's internal control procedures of cash. Indicate the weaknesses and how to improve, if any.a. The founder's sister serves
Listed below are five procedures followed by Alpha Corporation related with cash. 1. Payments are paid with checks numbered randomly.2. A bank reconciliation is prepared monthly.3. Anita writes
Assume that Kingston bookstore decided to buy 150 books at NT$350 per book on April 5. The credit terms were 2/10, n/30. Kingston paid half the price on April 10, the others were paid on April 20.
Referring to E 6-4, assume that Kingston found 10 books to have significant defects and decided to return these 10 books on April 8. It also found other 15 books to have small defects and asked for
Assume that HTC Corporation had the following transactions in July: paid one year insurance of NT$36,000 on July 1 for their managers; paid the rent of the office NT$100,000 for July on July 1;
Volvo Company established a petty cash fund on June 1, cashing a check for 100. During June, the petty cash receipts are as followed:The fund was replenished on June 30, and the fund contained 45. On
Libby Company established a petty cash fund on January 2 by cashing a check for NT$3,500. During January, the following expenditures were paid out of the fund. The cashier handling the fund found
Refer to E 6-8. Prepare the journal entries for replenishing petty cash funds when the cashier found that the amount left was NT\$345.E 6-8.Libby Company established a petty cash fund on January 2 by
Prepare a bank reconciliation for Bend Company at January 31, 2022, using the information shown.1. Cash per the accounting records at January 31 amounted to \(\$ 228,909\); the bank statement on this
Below are six descriptions of internal control problems. In the space to the left of each description, enter the code letter of the internal control principle that is most related to the problem
Francis Company prepared the following journal entries for the transactions about petty cash funds.Required:1. What was the size of the petty cash fund?2. What was the amount left before replenishing
Shiller Company established a petty cash fund \(\$ 5,000\) on February 1. During February, the company paid for the following expenditures out of the petty cash funds:On February 28, the clerk
According to the books of Alexander Company, the cash balance on October 31, 2022 was \(\$ 50,000\), while the bank statement showed \(\$ 66,185\). After inspection, the company found that the
Which one of the following steps is not a necessary step for revenue recognition?a. Identify the contract with the customer.b. Make sure that the seller should receive cash upon the transfer of goods
Johnnie International Company sold 200 boxes of Whiskey bottles, amounting to 8,500, to Party King Pub by accepting a 60-day, 10% note dated May 1, 2022. Make the entry necessary on May 1 for Johnnie
Referring to PE 7-9, make the entry necessary for Johnnie Co. if Party King Pub paid cash and interests after 60 days on June 30. Assume that there are 360 days in a year.PE 7-9,Johnnie International
Suppose Wal-Mart accepts from Apple Stores a \$15,000, 3-month, 9\% note dated September 30 in settlement of Apple's overdue account.(1) What is the maturity date of the note?(2) Assuming at the
Regarding periodic reporting, which of the following statements is not correct?a. Frequent periodic reporting is helpful for providing timely information;b. Typical fiscal year starts at January 1
Which of the following requires that expenses should be matched and recognized in the same period as the related revenue?a. Cost principleb. Going concern assumptionc. Matching
On August 1, the company paid $86,400 cash for a four-year insurance policy. The policy went into effect on August 1. Make the journal entry necessary on the company's books to record the payment for
For each type of adjustment listed, indicate whether it is an unrecorded receivable, an unrecorded liability, an unearned revenue, or a prepaid expense at December 31, 2022.1. Property taxes that are
Kearl Associates is a professional corporation providing management consulting services. The company initially debits assets in recording prepaid expenses and credits liabilities in recording
Masa Company provides computer network consulting services. The company initially debits assets in recording prepaid expenses and credits liabilities in recording unearned revenues. Give the
Wallin Enterprises disclosed the following information on December 31, 2022 (before any adjusting entries were made):1. In June, Wallin purchased an insurance premium for \(\$ 54,000\) for the 18
Consider the following information related to Pendleton Consulting:1. On October 1, 2022, Pendleton Consulting entered into an agreement to provide consulting services for six months to Soelberg
Carmen Company used $90,000 in cash to purchase land. Make the journal entry necessary to record the transaction.
Carmen Company used $30,000 in cash to repay a portion of its bank loan (see PE 3-11). For simplicity, assume that there is no interest on the loan. Make the journal entry necessary to record the
Carmen Company received $180,000 in cash as an additional investment by the stockholders (owners) of the company. Make the journal entry necessary to record the transaction.
Make the journal entries necessary to record the following eight transactions for Carmen Company.a. Purchased equipment on account for \($260,000\).b. Provided services for \($200,000\)
Mizubishi Motors, Inc., which provides auto rental services, entered into the following transactions during the month of June:a. Purchased a total of eight new cars and trucks from Jerry's Motors,
As of January 1, 2022, Gammon Corporation had the following balances in its general ledger:Gammon had the following transactions during 2022. All expenses were paid in cash, unless otherwise
What does IFRS stand for? Who sets up the IFRS and are there many countries adopting IFRS? What is the advantage to adopt IFRS?
What are the possible reasons for the SEC's waiver of the U.S. GAAP reconciliation for foreign registrants that followed IFRS to prepare financial statements?
Given that almost each country has its own generally accepted accounting principles, why do we need a set of internationally accepted accounting standards such as IFRS?
Lenders and investors both provide monetary resources to a company. What do they expect from the company? What are the potential conflicts of interest between lenders and investors?
Management runs the operation of a company with little or even no investment of money in the company, while investors (shareholders) invest their money in the company without paying attention to the
FASB, GAAP, SEC, CPA, AICPA, IRS, IASB, IFRS are all acronyms used in accounting. For the preceding list of acronyms, state what the acronym stands for and then give a definition of each acronym.
Briefly explain the evolutionary establishment of IASB.
According to the IASB, there have been more than 100 countries or jurisdictions adopting IFRS. What is the scope of IFRS when people mention this term?
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