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20.During the performance of the steps in the accounting cycle, trial balances are prepared at three key points. Using specific names where applicable, discuss the time of preparation and the purpose served by each of these trial balances. 21.The following steps in the accounting cycle are presented out of order below..
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  MULTIPLE CHOICE 1.All the following are standards of accounting information except a.flexibility. b.reliability. c.understandability. d.relevance. 2.According to the FASB, the usefulness of accounting is judged by which of the following two prime qualitative characteristics of accounting information? a.Comparability and neutrality b.Understandability and comparability c.Verifiability and timeliness d.Relevance and reliability 3.The qualitative characteristic of faithful representation contains all the following features except a.complete. b.verifiability. c.neutral. d.free.
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51.It is unlikely that a company would want to bond its employees who handle cash or inventory. 52.Management's regular assessment of its internal controls is called risk assessment. 53.Under an effective system of internal control, errors occur only as a result of fraud or dishonesty. 54.The separation-of-duties feature of internal control can be.
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21.The owner's capital for a sole proprietorship is similar in nature to which of the following for corporations? a.Stockholders' equity b.Retained earnings c.Common stock d.Dividends 22.Use this information to answer the following question. J. & B. Auto Parts, Inc. Balance Sheet December 31, 2010 Assets Cash$ 10,000 Short-term investments40,000 Notes receivable (due in ten months)30,000 Accounts receivable20,000 Merchandise inventory70,000 Land held for future use80,000 Land90,000 Building$100,000 Less accumulated.
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81.Use this balance sheet and income statement for the first year of operations for Layton Novelties, Inc. to answer the following question. Use ending balances whenever average balances are required for computing ratios. Layton Novelties, Inc. Balance Sheet December 31, 2010 AssetsLiabilities Current assets$ 28,000Current liabilities$  16,000 Investments12,000Long-term liabilities4,000 Property, plant, and equipment48,000Total liabilities$  20,000 Intangible assets32,000                     Stockholders' Equity Common.
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17.Answer the following questions. (Show your work.) a. Equipment is purchased for $48,000, to be used for eight years. Assuming zero value at the end of eight years, what is the equipment's carrying value after two years and three months? b. Prepaid Insurance has an $800 balance prior to adjustment. By year.
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51.Interest paid on debt would be entered on the multistep income statement in the category called a.selling expenses. b.other revenues and expenses. c.general and administrative expenses. d.operating expenses. 52.An advantage of the single-step income statement over the multistep form is a.the amount of information it provides. b.its simplicity. c.its comprehensiveness. d.its use in computing ratios. 53.Use this information to answer.
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41.Interest expense on a mortgage would be classified on a multistep income statement under the heading a.general and administrative expenses. b.selling expenses. c.cost of goods sold. d.other revenues and expenses. 42.Income from operations is arrived after considering all except a.administrative salaries. b.interest income. c.the cost of sales. d.sales returns and allowances. 43.Which of the following appears in different sections of.
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45.The income statement for Catlett Corporation included the following revenues and expenses for 20xx: Fees earned$103,000 Wages expense44,700 Insurance expense8,500 Interest expense5,200 Listed below are the related balance sheet account balances at year end for this year and last year: This YearLast Year Unearned Fees$7,800$6,600 Wages Payable2,7003,300 Prepaid Insurance1,200-- Interest Payable--800 a. Compute cash received for fees during the year. b. Compute.
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9.For each of the following oversights, state whether stockholders' equity will be understated, overstated, or not affected. ______ a. Failure to record depreciation ______ b. Failure to record accrued wages ______ c. Failure to convert unearned revenue to earned revenue ______ d. Failure to record accrued interest in the bank ______ e. Failure to record.
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28.Below are the adjusted accounts of DeMay Realtors, Inc., for the month ended July 31, 20xx, listed in alphabetical order: Accounts Payable$1,200Dividends$  3,000 Accounts Receivable10,800Income Taxes Expense300 Accumulated Depreciation–Income Taxes Payable300 Office Equipment12,000Land4,500 Cash3,450Office Equipment30,000 Commissions Revenue22,500Salaries Expense6,900 Common Stock24,000Utilities Expense450 Depreciation Expense– Office Equipment600 Prepare a post-closing trial balance. 29.The 20xx income statement for Newton Company showed rent expense of.
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  1.Each of the following statements is justified by a concept or convention of accounting. Write the letter in the blank next to each statement corresponding to the concept or convention involved. a. Consistencyd. Full disclosure b. Materialitye. Cost-benefit c. Conservatism _____ 1. This convention best enhances comparability of financial statements between years. _____ 2. A merger.
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4.The following lettered items represent a classification scheme for a balance sheet, and the numbered items represent accounts. In the blank next to each account, write the letter indicating to which category it belongs. a. Current assetse. Current liabilities b. Investmentsf. Long-term liabilities c. Property, plant, and equipmentg. Stockholders' equity d. Intangible assetsh. Not.
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TRUE/FALSE 1.Both investors and creditors have an interest in a company's ability to generate favorable cash flows. 2.Investors and creditors use financial statements to evaluate a company's ability to pay dividends and interest. 3.Financial statements are important to the efficient allocation of resources in our economy. 4.Financial statements are generally prepared for a limited.
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61.The profit margin equals a.net sales divided by net income. b.gross margin divided by net income. c.net income divided by gross margin. d.net income divided by net sales. 62.Asset turnover equals a.net sales divided by average total assets. b.average total assets divided by net income. c.average total assets divided by total liabilities. d.net income divided by average total assets. 63.Use.
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61.The treasurer should prepare and sign a check only after a proper check authorization has been provided. 62.Proper control procedures can guarantee the prevention of theft. 63.All systems of internal control are identical and, once established, do not need to be changed. 64.Management is responsible for establishing a satisfactory system of internal control. 65.A.
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37.Use the following unadjusted trial balance to prepare adjusting entries, given the additional information below it. Assume financial statements are prepared quarterly. Omit explanations. Crivelli Financial Services Unadjusted Trial Balance September 30, 2010 Cash$ 20,000 Accounts Receivable6,400 Office Supplies1,000 Prepaid Rent3,600 Office Furniture9,600 Accumulated Depreciation–Office Furniture$     400 Accounts Payable14,800 Unearned Revenue2,000 Common Stock20,400 Consulting Revenue12,000 Salaries Expense7,400 Insurance Expense1,600 _______      $49,600$49,600 a. Of the revenue received in advance,.
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35.In the journal provided, prepare year-end adjustments for the following situations. Omit explanations. a. Accrued interest on notes receivable is $105. b. Of the $12,000 received in advance of earning a service, one-third was still unearned by year end. c. Three years' rent, totaling $36,000, was paid in advance at the beginning of.
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31.Oil wells and coal mines used in the normal course of business would appear in which section of the balance sheet? a.Property, plant, and equipment b.Investments c.Current assets d.Intangible assets 32.The normal operating cycle helps define which of the following balance sheet sections? a.Intangible assets b.Current assets c.Property, plant, and equipment d.Stockholders' equity 33.Liabilities have which of the following two.
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43.Below are the adjusted accounts of Slate Realtors, Inc., for the month ended Oct. 31, 2010, listed in alphabetical order: Accounts Payable$ 1,100Dividends$ 1,500 Accounts Receivable4,800Income Taxes Expense100 Accumulated Depreciation–Income Taxes Payable100 Office Equipment6,000Office Equipment15,000 Cash2,400Prepaid Rent2,200 Commissions Revenue10,800Retained Earnings8,000 Common Stock4,000Salaries Expense3,500 Depreciation Expense–Utilities Expense200 Office Equipment300 In the journal provided, prepare Slate's closing entries (omit explanations). General JournalPage 1 Date DescriptionPost. Ref. Debit Credit 44.Below.
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11.To obtain a slightly more accurate measure of net income, Gabrielli, Inc., has determined that it must hire two full-time accountants. If it decides against the hiring, it has followed the convention of a.full disclosure. b.materiality. c.comparability. d.cost-benefit. 12.Which of the following accounting conventions would an accountant most likely apply when facing major uncertainties? a.Full disclosure b.Conservatism c.Materiality d.Consistency 13.Expensing.
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71.Which of the following is a measure of liquidity? a.Return on equity b.Return on assets c.Working capital d.Profit margin 72.Current assets divided by current liabilities is known as the a.profit margin. b.current ratio. c.working capital. d.capital structure. 73.Which of the following is not expressed in terms of a percentage? a.Return on equity b.Debt to equity ratio c.Current ratio d.Profit margin 74.Which of the following is.
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41.Advertising expense appears as a selling expense on the income statement. 42.An advantage of the single-step income statement is that it is less complex than the multistep form. 43.Freight paid on goods shipped to customers is classified as a selling expense. 44.Interest paid on bank loans is classified as cost of goods sold. 45.The.
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20.Use the information from the following multistep income statement to prepare a single-step income statement in proper form. Olga & Daughters, Inc. Income Statement For the Month Ended July 31, 2010 Net sales$15,000 Cost of goods sold9,000 Gross margin$  6,000 Operating expenses Selling expenses$1,200 General and administrative expenses800         Total operating expenses2,000 Income from operations$ 4,000 Other revenues and expenses Dividend income$  250 Interest income350 Less.
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6.In the space below, state whether each situation is a deferral or an accrual. ______a.Depreciation on machinery is $7,200 for the accounting period. ______b.Interest that has been incurred on a loan but that has not yet been paid or recorded is $675. ______c.Office supplies of $965 were on hand at the beginning of.
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9.The following lettered items represent a classification scheme for a multistep income statement. In the blank next to each account, write the letter indicating to which category it belongs. a. Revenuesd. General and administrative expenses b. Cost of goods solde. Other revenues and expenses c. Selling expensesf. Not on income statement _____ 1. Depreciation.
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11.The Sarbanes-Oxley Act requires a company to guarantee that its financial statements are 100 percent accurate. 12.Only the chief financial officer and the company's CPAs are responsible for the accuracy of financial statements. The chief executive officer is not expected to understand financial information. 13.To understand accounting information, users must be familiar.
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22.1. From the simplified balance sheet and income statement of the business below, compute the following ratios. Assume that the April 30 amounts for total assets and stockholders' equity also represent their average amounts for the period. Round percentages to the nearest whole percent. a. Working capital b. Current ratio c. Profit margin d..
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39.Prepare year-end adjusting entries for each of the following situations: a. The Store Supplies account showed a beginning debit balance of $400 and purchases of $2,800. The ending debit balance was $800. b. Depreciation on buildings is estimated to be $7,300. c. A one-year insurance policy was purchased for $2,400. Nine months have.
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TRUE/FALSE 1.Service businesses can be classified as wholesalers and retailers. 2.The operating cycle involves the purchase and sale of merchandise inventory as well as the subsequent collection of cash from credit sales. 3.Profitability management involves planning a business's cash receipts and cash payments. 4.A sale takes place when title to the goods transfers to.
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121.Use this adjusted trial balance to answer the following question. Dan's Marina Adjusted Trial Balance December 31, 2010 Cash$ 2,500 Accounts Receivable3,500 Supplies1,500 Prepaid Insurance2,500 Dock12,000 Accumulated Depreciation–Dock$ 3,000 Accounts Payable6,000 Common Stock10,000 Dividends4,000 Boat Rentals17,000 Depreciation Expense–Dock1,000 Wages Expense6,500 Insurance Expense2,000 Income Taxes Expense500   _______      $36,000$36,000 The entry to close Income Summary includes a a.credit to Common Stock for $8,000. b.credit to Income Summary for $12,000. c.debit to Income Summary for $7,000. d.debit.
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51.Return on assets is a better measure of profitability than profit margin because it takes into account the assets invested in the business. 52.Profitability means having enough cash on hand to pay bills when they become due. 53.Asset turnover measures how efficiently assets are used to produce sales. 54.A company with a current.
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101.An important purpose of closing entries is to a.update the nominal accounts at year end. b.set permanent account balances to zero to begin the next period. c.help achieve the goals of the matching principle. d.transfer net income or loss to Retained Earnings. 102.Formal closing entries ultimately will affect a.Common Stock. b.total liabilities. c.Retained Earnings. d.total assets. 103.Failure to prepare formal.
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41.Given the adjusted trial balance below, prepare (in good form) an income statement, statement of retained earnings, and balance sheet. The name of the business is Duncore Secretarial Service and the accounting period coincides with the calendar year. Duncore Secretarial Service Adjusted Trial Balance December 31, 2010 Cash$   265 Accounts Receivable600 Supplies10 Prepaid Insurance10 Office Equipment1,000 Accumulated Depreciation–Office Equipment$ .
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91.The process of posting is associated most closely with the a.source documents. b.ledger. c.financial statements. d.trial balance. 92.Which of the following accounting cycle steps comes after the others? a.Journal entries are posted. b.The financial statements are prepared. c.Source documents are analyzed. d.Adjusting entries are recorded and posted. 93.Which of the following accounting cycle steps comes before the others? a.Adjusting entries are.
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16.Using the following data, prepare a classified balance sheet as of December 31, 2010, for the Lee Company. There are 2,000 shares of $10 par value common stock issued and outstanding. Accounts Payable$1,600Accounts Receivable3,000 Building Not Currently Used19,000Cash5,200 Accumulated Depreciation, Equipment8,000Unearned Revenue800 Short-Term Investments2,000 Common Stock20,000Land16,000 Retained Earnings22,600Equipment15,000 Copyright5,000Long-Term Investments800 Bonds Payable (due in 20 years)13,000 17.Using the following.
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111.Use this information to answer the following question. The Retained Earnings, Dividends, and Income Summary accounts for Gula's Repair Corporation for the accounting period are presented below in T account form after the recording and posting of closing entries: The amount of dividends for the period is a.$400. b.$100. c.$500. d.$600. 112.Use this information to answer the.
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21.The convention of full disclosure requires that financial statements present all the information relevant to users' understanding of the statements. 22.General-purpose external financial statements that are divided into subcategories are called classified financial statements. 23.Classified balance sheets list accounts in alphabetical order. 24.Natural resources, such as coal mines and oil wells, are classified.
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25.The Retained Earnings, Dividends, and Income Summary accounts for Gegor's Repair Shop, Inc., for the accounting period are presented below in T account form after the recording and posting of closing entries. From the T accounts, determine the following: a. Revenue for the period b. Net income (or net loss) c. Dividends for the.
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31.With the periodic inventory system, goods available for sale must be calculated before cost of goods sold. 32.Ending merchandise inventory is included in the calculation of goods available for sale. 33.The calculation of goods available for sale during the year is not affected by the previous year's ending merchandise inventory. 34.The change in.
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  SHORT ANSWER 1.Which two broad account categories are used to determine net income? Define each category and list two examples of each type. 2.How and why is the matching rule applied to the cost of a building? 3.What is the purpose of adjusting entries? 4.Distinguish between a deferral and an accrual. 5.In the space below,.
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31.Contributed capital is shown on a corporate balance sheet as two amounts: the par value of the issued stock and additional paid-in capital. 32.The term net worth is a more accurate term than owner's equity because assets are recorded at original cost rather than at current value. 33.Operating expenses include cost of.
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11.Adding together the ending merchandise inventory and cost of goods sold gives the amount of goods available for sale. 12.A large discount chain, like Wal-Mart or Target, most likely would use the periodic inventory system to maintain control of its inventory. 13.A retail operation would not have to take a physical inventory.
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