21. Larken Company\'s records show the following for the month of January: Total

Question

21. Larken Company's records show the following for the month of January:
Total Retained Earnings at January 1 $400,000
Total Retained Earnings at January 31 500,000
Total Revenues 670,000
Total Dividends Declared 40,000
Total expenses for January were
a. $740,000.
b. $530,000.
c. $570,000.
d. $770,000.

22. Petson Company's financial information is presented below.
Sales $ ???? Purchase Returns and Allowances $ 15,000
Sales Returns and Allowances 30,000 Ending Merchandise Inventory 35,000
Net Sales 250,000 Cost of Goods Sold 180,000
Beginning Merchandise Inventory ???? Gross Profit ????
Purchases 170,000

The missing amounts above are:
Sales Beginning Inventory Gross Profit
a. $280,000 $60,000 $70,000
b. $220,000 $45,000 $100,000
c. $280,000 $45,000 $70,000
d. $220,000 $60,000 $100,000



____ 23. The preparation of closing entries
a. is an optional step in the accounting cycle.
b. results in transferring the balances in all temporary accounts to Retained Earnings.
c. is necessary before financial statements can be prepared.
d. results in zero balances in all accounts at the end of the period so that they are ready for the following period's transactions.

____ 24. Allowance for Doubtful Accounts is reported in the
a. income statement under other expenses and losses.
b. balance sheet as a contra liability account.
c. balance sheet as a contra asset.
d. income statement under other revenues and gains.

____ 25. Current liabilities are obligations that are reasonably expected to be paid from
Existing Creation of Other
Current Assets Current Liabilities
a. No No
b. No Yes
c. Yes No
d. Yes Yes

____ 26. Which of the following errors will cause a trial balance to be out of balance? The entry to record a payment on account was
a. posted as a debit to Cash and a debit to Accounts Payable.
b. posted as a debit to Cash and a credit to Accounts Payable.
c. not posted at all.
d. posted as a debit to Accounts Receivable and a credit to Cash.

____ 27. The primary accounting standard-setting body in the United States is the
a. Financial Accounting Standards Board.
b. Accounting Principles Board.
c. Securities and Exchange Commission.
d. Internal Revenue Service.

____ 28. Units of activity is an appropriate depreciation method to use when
a. the productivity of the asset varies significantly from one period to another.
b. the asset's use will be constant over its useful life.
c. it is impossible to determine the productivity of the asset.
d. the company is a manufacturing company.

____ 29. The calculation of depreciation using the declining-balance method
a. yields an increasing depreciation expense each period.
b. multiplies a constant percentage times the previous year's depreciation expense.
c. ignores salvage value in determining the amount to which a constant rate is applied.
d. multiplies a declining percentage times a constant book value.

____ 30. A current liability is a debt that can reasonably be expected to be paid
a. out of currently recognized revenues.
b. between 6 months and 18 months.
c. within one year, or the operating cycle, whichever is longer.
d. out of cash currently on hand.

Explanation / Answer

21. Larken Company's records show the following for the month of January: Total Retained Earnings at January 1 $400,000 Total Retained Earnings at January 31 500,000 Total Revenues 670,000 Total Dividends Declared 40,000 Total expenses for January were b. $530,000. 22. Petson Company's financial information is presented below. Sales $ ???? Purchase Returns and Allowances $ 15,000 Sales Returns and Allowances 30,000 Ending Merchandise Inventory 35,000 Net Sales 250,000 Cost of Goods Sold 180,000 Beginning Merchandise Inventory ???? Gross Profit ???? The missing amounts above are: Sales Beginning Inventory Gross Profit a. $280,000 $60,000 $70,000 ____ 23. The preparation of closing entries c. is necessary before financial statements can be prepared. ____ 24. Allowance for Doubtful Accounts is reported in the b. balance sheet as a contra liability account. ____ 25. Current liabilities are obligations that are reasonably expected to be paid from Existing Creation of Other Current Assets Current Liabilities c. Yes No ____ 26. Which of the following errors will cause a trial balance to be out of balance? The entry to record a payment on account was a. posted as a debit to Cash and a debit to Accounts Payable. ____ 27. The primary accounting standard-setting body in the United States is the a. Financial Accounting Standards Board. ____ 28. Units of activity is an appropriate depreciation method to use when a. the productivity of the asset varies significantly from one period to another. ____ 29. The calculation of depreciation using the declining-balance method d. multiplies a declining percentage times a constant book value. ____ 30. A current liability is a debt that can reasonably be expected to be paid c. within one year, or the operating cycle, whichever is longer.

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