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Jenny's Bakery recently delivered a bad batch of cakes to a local restaurant. Jenny quickly refunded the cost of the cakes to the restaurant. Her accountant made a _____ to her Refunds of Sales account for this transaction:

(A)note

(B)debit

(C)credit

(D)cost adjustment

(E)deposit

The Correct Answer

What is the difference between a balance sheet and a trial balance? Mark one answer:

(A)A trial balance does not show profit, a balance sheet does. (B)A trial balance is used at month end and a balance sheet at year end. (C)A trial balance is used to determine profit, a balance sheet to determine net assets. (D)A trial balance is used to close accounts, a balance sheet to open accounts. (E)A trial balance is an internal document, a balance sheet is an external document.

Correct Answer: E

Cartman's Cats had a total of 100,000 shares of common stock issued. In February, they reacquired 20,000 shares and did not retire them. How many shares of outstanding stock do they currently have? Mark one answer:

(A)100,000 (B)120,000 (C)20,000 (D)60,000 (E)80,000

Correct Answer: E

Jim's Jeans is being sued by a former employee for $100,000. The employee is claiming age discrimination. She is twenty-four and was terminated when Jim decided that he wanted all employees to be over the age of sixty-five. Jim's attorney has told him that the employee has a strong case and will probably win. How does this impact Jim's accounting records? Mark one answer:

(A)A note is made on the Balance Sheet regarding the lawsuit. (B)There is no impact on the financial statement unless the employee wins the suit. (C)A loss of $100,000 appears in the owner's equity section on the balance sheet. (D)An entry will appear on the statement of cash flows. (E)A contingent liability of $100,000 appears on the income statement as an expense.

Correct Answer: E

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