A customer purchased a ,000 item at ApplianceWorld, paying with a credit card (VISA). The merchant is charged a 2% fee by the credit card company. When recording this sale, the merchant would:
A) debit accounts receivable for ,000.
B) credit sales revenue for ,000.
C) credit sales revenue for ,800.
D) credit unearned sales revenue for ,000.
E) None of the above is correct.
2-
The primary objective of financial accounting is to
A) provide information about a business to internal parties.
B) provide information about a business’ future business strategies.
C) provide useful economic information about a business to help external parties make sound financial decisions.
D) provide predictions of future stock price.
E) none of the above is the primary objective of financial accounting.
When credit terms for a sale are 2/15, n/40, the customer saves by paying the bill early. Approximately what percent would this savings amount to on an annual basis?
A) 18%.
B) 20%.
C) 30%.
D) 37%.
E) None of the above is correct.
18.
A post closing trial balance would include account balances for only the
A) assets and liabilities.
B) revenues and expenses.
C) assets, liabilities, and stockholders’ equity.
D) assets, liabilities, stockholders’ equity, revenues, expenses, and dividends.
E) None of the above is correct.
19.
Which of the following activities violates the revenue recognition principle?
A) Recording revenue in December 2006 for units manufactured but not yet sold to customers
B) Recording cash received in advance from customers as revenue when the product is not yet shipped
C) Not recording interest earned in 2006 until the cash is received in 2007
D) None of the above violates the revenue recognition principle
E) All of the above violates the revenue recognition principle
Marion Company had these transactions during the first month of the new accounting period.
Sold merchandise for ,000 on credit; its cost was ,000 and it was purchased and paid for last year.
Collected ,000 from an account receivable. The account was established in the previous year.
Used office supplies of ,500 purchased and paid for in the prior year.
Reference: 03_02
Marion’s net income for the new period would be
A) ,500
B) ,000
C) ,000
D) ,500
E) None of the above is correct
21.
When the price earnings (P/E) ratio for a company decreases from 2006 to 2007, it means the company’s investors
A) believe the future earnings will exceed the current earnings level.
B) believe the future earnings will be lower than the current earnings level.
C) are confident about the company’s future operating effectiveness.
D) are not confident about the company’s future operating effectiveness.
E) both B and D are true.
On January 1, 2007, Denmark Inc., started the year with a 0,000 credit balance in its retained earnings account. During 2007, the company earned net income of ,000 and declared and paid dividends of ,000. Also, the company received cash of ,000 as an additional investment by its owners. Therefore, the balance in retained earnings on December 31, 2007, would be
A) 0,000.
B) 0,000.
C) 5,000.
D) 0,000.
E) None of the above is correct.
23.
Financial accounting
A) provides information primarily for external decision makers.
B) is required for corporations but probably would not be done by other business entities.
C) provides information primarily for the use of managers of the company.
D) has been practiced in this country for approximately the last 15 years.
The purchase of supplies for cash would
A) Not change total assets.
B) Increase total assets.
C) Increase liabilities.
D) Decrease liabilities.
E) None of the above is correct
Bad debt expense should
A) appear on the balance sheet as a contra-asset.
B) appear on the income statement as part of selling expenses.
C) appear on the income statement as a contra- revenue.
D) not appear in the financial statements.
E) None of the above is correct.
26.
Which of the following is/are criteria for recording a sale?
A) Title and risks of ownership have been exchanged.
B) The company is reasonably assured of collecting the receivable.
C) The sales price has been fixed.
D) Both A and B are correct.
E) All of the above are correct
27.
Which of the following statements is true?
A) Deckers Outdoor sells primarily to other businesses on a credit basis.
B) Deckers Outdoor would record revenue when cash collection is made from their customers.
C) Deckers Outdoor records sales upon shipment of product to their customers.
D) Both A and C are true.
E) All of the above are true
28.
An income statement reports
A) revenues, expenses, assets, and liabilities during an accounting period.
B) resources, liabilities, and stockholders’ equity of a business at a point in time.
C) net income of a
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