8. On January 1, 20B, the ledger of Global Corporation correctly showed supplies inventory of $500.
During 20B, supplies purchases amounted to $700. A count (inventory) of supplies on hand at
December 31, 20B, showed $400. The 20B income statement should
Model Company keeps a small inventory of supplies used for cleaning and maintenance
purposes. On January 1, 20A, the inventory of supplies on hand was $400. During the year,
supplies purchased were debited to the supplies inventory account in the amo
Why is the historical cost principle so important for statement of financial position reporting?
The cost principle is important for statement of financial position reporting because of valuation
issues. The cash-equivalent cost is verifiable. If it w
During 20B, New Company earned service revenues amounting to $200,000, of which
$120,000 were collected in cash; the balance will be collected in January 20C. The 20B
statement of earnings of the company should report which of the following amounts fo
Before the closing entries were made at the end of 20B, the following data were taken from the
accounts of Joe Corporation:
What is the amount of shareholders' equity that should appear on Joe Corporation's statement
of financial position dated Decemb
107.You have been hired as the accountant for a newly formed real estate company called Porter Real
Estate Limited. The following business transactions occurred during the month of September,
1. Shareholders invest $50,000 in cash for 10,000 common
60. Operating revenues result from the sale of goods or services.
61. A gain on sale of land causes an increase in income as a result of normal operating activities.
62. Cost of sales is usually the largest expense for manufacturing
If Pizza Pizza reports an asset turnover ratio of 2.34 for 2013 and their competitor Pizza Hut
reports 3.79 for their 2013 ratio, it means which of the following?
A. Pizza Pizza is better able to pay their current obligations with their current assets
The operating cycle of a business is best defined as which of the following?
A. the period of time for which we prepare our financial statements
B. the length of time over which our plant and equipment assets are expected to be used by the
company in g
40. On January 1, 20B, Grover Inc., started the year with a $22,000 credit balance in its retained
earnings account. During 20B, the company earned profit of $40,000 and declared and paid
dividends of $10,000. Also, the company received cash of $15,000 as
The following trial balance of Lazy Corporation dated December 31, 20A, developed by a clerk,
Prepare a corrected Trial Balance.
Learning Objective: 04-02 Use a trial balance to prepare financial sta
The post-closing trial balance will have fewer accounts than the adjusted trial balance.
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Learning Objective: 04-05 Explain the closing process at the end of the period.
Chapter 4 Key
An adjusted trial balance
A. is prepared after the financial statements are completed.
B. proves the equality of the total debit balances and total credit balances of ledger accounts
after all adjustments have been made.
C. is a required
20. Assume Minor Company recorded the following adjusting entry at year-end:
If the beginning balance in prepaid insurance was $700 and $1,500 was paid for an insurance
premium during the year, the ending balance in the prepaid insurance account (after th
92. The net profit margin ratio (Profit Net Sales) measures how much profit is earned as a
percentage of revenues generated during the period.
93. The return on equity measures how well management used shareholders' investment to generate
115.Settler Service is completing the information processing cycle at the end of its annual accounting
period, December 31, 20A. Four adjusting entries must be made to update the accounts. The
following accounts, selected from the company's chart of accou
During the accounting period, Luxor Company had the following data:
Sales of products:
This is the first year of business.
What were the sales revenue and expenses?
A. Choice A
B. Choice B
C. Choice C
D. Choice D
Calculation: Sales = $70,000
25. A company receives a $25,000 cash deposit from a customer on March 15 but will not deliver the
goods until April 20. Which of the following statements is false?
A. Cash will be reported on the statement of cash flows for the month of March.
131.The following income statement was reported for Cotrell Inc. for the first year of operations ending
December 31, 20B, reported in thousands of dollars:
Calculate the following:
(a) net profit margin
(b) earnings per share if there are 100,000 shares
Settler Service is completing the information processing cycle at the end of its annual
accounting period, December 31, 20A. Four adjusting entries must be made to update the
accounts. The following accounts, selected from the company's chart of acco
102.Why might managers be tempted to violate the revenue principle and the matching principle in
103.Analyze the transactions of a business organized as a corporation described below and indicate
their effect on the basic accounting e
On January 1, 20B, the ledger of Global Corporation correctly showed supplies inventory of
$500. During 20B, supplies purchases amounted to $700. A count (inventory) of supplies on
hand at December 31, 20B, showed $400. The 20B income statement should
Ultra Realty received a cheque for $21,000 on July 1, which represents a 6-month advance
payment of rent on a building it rents to a client. Unearned Rental Revenue was credited for the
full $21,000. Financial statements will be prepared on July 31. U
The statement of cash flows does which of the following?
A. Explains what caused profit during the accounting period.
B. Identifies all assets held at the end of the accounting period by type and amount.
C. Explains that the trial balance is in balanc
Collection of a $600 accounts receivable
A. increases an asset $600; decreases a liability $600.
B. decreases a liability $600; increases shareholders' equity $600.
C. decreases an asset $600; decreases a liability $600.
D. has no effect on total asse
33. Which of the following statements best describes the relationship between profit for the period and
the ending balance in retained earnings?
A. Profit for the period reduces the ending balance of retained earnings.
B. Retained earnings at the end of t
105.This question focuses on the accounting cycle and the accounting model. For each item listed,
indicate the best description by entering a capital letter in the space provided.
A. End-of-period entries to transfer balances of temporary acco
Explain why the profit reported on the statement of earnings is usually not equal to net cash
flows from operating activities on the statement of cash flows.
Profit on the statement of earnings is an application of the accrual basis of accounting.
Unadjusted financial statements do not reflect revenues earned or expenses incurred in the
accounting period if the receipt or payment of cash occurs in a different period.
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