Multiple Choice Answers

B. Bonds Company The following is a single-step income statement for the B. Bonds Company:

B. Bonds Company Income Statement
For the Year Ended December 31, 2004
Revenues
Net Sales $200,000
Interest Income 17,500
Total Revenues $217,500
Expenses
Cost of Goods Sold $50,000
Selling Expenses 20,000
General and Administrative Expenses 27,500
Interest Expense 12,500
Income Tax Expense 39,000
Total Expenses 149,000
Net Income $68,500
Refer to B. Bonds Company. If the income statement were prepared in a multiple-step format, income from operations would be __________.

a. $ 77,500
b. $ 80,000
c. $ 102,500
d. $ 97,500

A check drawn by a depositor in payment of a voucher for $925 was recorded in the journal as $295. What entry is required in the depositor’s accounts?

a. decrease Accounts Payable; decrease Cash
b. increase Cash; decrease Accounts Receivable
c. increase Cash; increase Accounts Payable
d. increase Accounts Receivable; decrease Cash

CPA Assume a CPA bills his clients $20,000 for fees earned in September. He collects $5,000 in September and the balance in October. Refer to CPA. Under the cash basis of accounting, how much revenue should the CPA recognize in September?

a. $0
b. $20,000
c. $15,000
d. $5,000

Bank customers are considered creditors of the bank so the bank shows their accounts as a liability on the bank’s records.

True
False

Using a perpetual inventory system, the return from a customer of merchandise sold on account:

a. decreases Sales Returns and Allowances
b. decreases Merchandise Inventory
c. decreases Cost of Merchandise Sold
d. increases Cost of Merchandise Sold