8. Which of the following statements about reversing entries is true?

a. Identical account balances are achieved in the subsequent accounting period whether reversing entries are utilized or not.+

b. Reversing entries may not be used with accrued revenues.

c. Reversals are generally applied to those adjusting items that do not involve future cash flow.

d. Reversing entries would not be prepared if a company also utilized closing entries.

e. all of the above statements are true.

9. Current assets are those assets which management intends to convert into cash or consume within:

a. The operating cycle

b. One year+

c. Three years

d. The longer of (a) or (b)

e. The shorter of (a) or (b)++

10. If a company had a current ratio of 0.5, then which of the following statements regarding that company's working capital would be true?

a. The company's working capital would be positive.

b. The company's working capital would be zero.

c. The company's working capital would be negative.+

d. The company's working capital would be 2:1.

e. The company's working capital would be 1:2.

11. Purchasers of merchandise may be dissatisfied with the quality of goods purchased on account, and return the goods to the seller with an indication that payment will not be forthcoming. In such case, the document prepared by the purchaser is called:

a. a debit memorandum.++

b. a credit memorandum.+

c. a receiving report.

d. an invoice.

e. a bill of lading

12. Which of the following statements is true?

a. Cash discounts are used to reduce the invoice price below the stated list price.+

b. The expression 2/30, n/60, means that a 2% cash discount is available if the invoice is paid within 30 to 60 days.

c. Cash discounts may not be used in conjunction with trade discounts.

d. Cash discounts normally apply to the invoice price of the merchandise, excluding freight charges.

e. (a) and (d)

13. On February 1, Crown Company purchased $2,000 of merchandise, terms 2/10, n/30. Crown uses the gross method of recording purchases. Payment of the accounts payable was made on February 26. Which of the following journal entries is appropriate for the February 26 transaction?

a. Purchases 2,000

Accounts Payable 2,000

b. Accounts Payable 1,960

Cash 1,960

c. Accounts Payable 1,960

Purchases Discounts Lost 40

Cash 2,000

d. Accounts Payable 2,000

Cash 2,000+

e. Accounts Payable 1,900

Purchases Discounts Lost 100

Cash 2,000

14. Dodd Company utilizes the periodic inventory accounting system. Dodd had beginning inventory of $59,000, ending inventory of $37,000, and net purchases of $123,000. Which of the following components should be included in the year-end closing entries prepared by Dodd?

a. Purchases 123,000

Inventory 123,000

b. Income Summary 37,000

Inventory 37,000

c. Income Summary 59,000

Inventory 59,000

d. Income Summary 47,000

Inventory 47,000

e. None of the above +

15. A multiple-step income statement is thought to be more beneficial to financial users because of the revelation of important relationships. Which of the following is not separately identified on a multiple-step income statement?

a. Gross profit

b. Net income

c. Income taxes

d. Total costs and expenses+

e. (a) and (c)

16. A credit memorandum accompanying a bank statement would occur for which of the following items?

a. A previously deposited customer check which was returned NSF.

b. Bank service charges for the month.

c. The proceeds of a note collected by the bank are deposited to the account.++

d. Each of the above.

e. None of the above+

17. A bank reconciliation sometimes points to the need for adjusting entries. In general, the source of the adjustments is:

a. the reconciliation of the ending balance per the bank statement to the adjusted cash balance.

b. the reconciliation of the cash balance per the company records to the adjusted cash balance.+

c. the reconciliation of the ending balance per the bank statement to the adjusted trial balance.

d. both a and b.

e. none of the above.

18. Malory Company provides the following information about the month-end bank reconciliation:

Ending cash per bank statement $1,367

Ending cash per company records 7,383

Monthly bank service charge 25

Deposits in transit at month-end 8,345

Outstanding checks at month-end 2,399

Customer check returned NSF 45

What journal entry should be recorded to cause the company records to be correct?

a. Cash 70

Cash Short & Over 70

b. Miscellaneous Expense 70

Cash 70

c. Miscellaneous Expense 25

Accounts Receivable 45

Cash 70+

d. Miscellaneous Expense 2,399

Cash 2,399

e. Miscellaneous Expense 90

Cash 90