2301 Accounting Final Exam

The interest charged on a $90,000, 3-month note payable, at the rate of 8%, would be

$1,800

In 2015, Boyle Company had credit sales of $1,080,000 and granted sales discounts of $24,000. On January 1, 2015, Allowance for Doubtful Accounts had a credit balance of $26,400. During 2015, $45,000 of uncollectible accounts receivable were written off. Past experience indicates that 3% of net credit sales become uncollectible. What should be the adjusted balance of Allowance for Doubtful Accounts at December 31, 2015?

$13,080

Car and Auto Sisters had retained earnings of $18,000 on the balance sheet but disclosed in the footnotes that $3,000 of retained earnings was restricted for plant expansion and $1,000 was restricted for bond repayments. Cash of $2,000 had been set aside for the plant expansion. How much of retained earnings is available for dividends?

$14,000

Ultramega Company collected $19,600 in May of 2015 for 4 months of service which would take place from October of 2015 through January of 2016. The revenue reported from this transaction during 2015 would be

$14,700

On July 1, 2015, Hale Kennels sells equipment for $220,000. The equipment originally cost $600,000, had an estimated 5-year life and an expected salvage value of $100,000. The accumulated depreciation account had a balance of $350,000 on January 1, 2015, using the straight-line method. The gain or loss on disposal is

$20,000 gain

A bond with a face value of $200,000 and a quoted price of 1021/4 has a selling price of

$204,250

Vega Corporation's December 31, 2015 balance sheet showed the following: 8% preferred stock, $20 par value, cumulative, 15,000 shares authorized; 10,000 shares issued $ 200,000 Common stock, $10 par value, 1,000,000 shares authorized; 975,000 shares issued, 960,000 shares outstanding 9,750,000 Paid-in capital in excess of par—preferred stock 30,000 Paid-in capital in excess of par—common stock 11,500,000 Retained earnings 3,750,000 Treasury stock (15,000 shares) 315,000 Vega's total paid-in capital was

$21,480,000

Fat Possum's Service Shop started the year with total assets of $330,000 and total liabilities of $2,400,000. During the year, the business recorded $630,000 in revenues, $420,000 in expenses, and paid dividends of $60,000. The net income reported by Fat Possum's Service Shop for the year was

$210,000

At October 1, 2015, Padilla Industries had an accounts payable balance of $40,000. During the month, the company made purchases on account of $33,000 and made payments on account of $48,000. At October 31, 2015, the accounts payable balance is

$25,000

A credit sale of $3,600 is made on July 15, terms 2/10, n/30, on which a return of $200 is granted on July 18. What amount is received as payment in full on July 24?

$3,332

On July 1, 2015, Jenks Company purchased the copyright to Jackson Computer tutorials for $324,000. It is estimated that the copyright will have a useful life of 5 years with an estimated salvage value of $24,000. The amount of Amortization Expense recognized for the year 2015 would be

$30,000

At the beginning of September 2015, Stella Company reported Inventory of $8,000. During the month, the company made purchases of $35,600. At September 30, 2015, a physical count of inventory reported $8,400 on hand. Cost of goods sold for the month is

$35,200

Kingston Company purchased a piece of equipment on January 1, 2015. The equipment cost $200,000 and had an estimated life of 8 years and a salvage value of $25,000. What was the depreciation expense for the asset for 2016 under the double-declining-balance method?

$37,500

Nicklaus Company has decided to sell one of its old machines on June 30, 2015. The machine was purchased for $200,000 on January 1, 2011, and was depreciated on a straight-line basis for 10 years with no salvage value. If the machine was sold for $65,000, what was the amount of the gain or loss recorded at the time of the sale?

$45,000

If total liabilities decreased by $30,000 and stockholders' equity decreased by $20,000 during a period of time, then total assets must change by what amount and direction during that same period?

$50,000 decrease

In the first month of operations for Gallowsbird Industries, the total of the debit entries to the cash account amounted to $36,000 ($16,000 investment by stockholders and revenues of $20,000). The total of the credit entries to the cash account amounted to $22,000 (purchase of equipment $8,000 and payment of expenses $14,000). At the end of the month, the cash account has a(n)

$6,000 debit balance

Netta Shutters has the following inventory information. Nov. 1 Inventory 30 units @ $8.00 8 Purchase 120 units @ $8.30 17 Purchase 60 units @ $8.40 25 Purchase 90 units @ $8.80 A physical count of merchandise inventory on November 30 reveals that there are 90 units on hand. Assume a periodic inventory system is used. Ending inventory under LIFO is

$738

The interest charged on a $400,000, 90-day note payable, at the rate of 8%, would be

$8,000

Glenn Company purchased merchandise inventory with an invoice price of $9,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Glenn Company pays within the discount period?

$8,820

Effie Company uses a periodic inventory system. Details for the inventory account for the month of January, 2015 are as follows: Units Per unit price Total Balance, 1/1/15 200 $5.00 $1,000 Purchase, 1/15/15 100 5.30 530 Purchase, 1/28/15 100 5.50 550 An end of the month (1/31/15) inventory showed that 160 units were on hand. If the company uses FIFO, what is the value of the ending inventory?

$868

These are selected account balances on December 31, 2015. Land (location of the office building) $100,000 Land (held for future use) 150,000 Office Building 700,000 Inventory 200,000 Equipment 450,000 Office Furniture 150,000 Accumulated Depreciation 425,000 What is the total net amount of property, plant, and equipment that will appear on the balance sheet?

$975,000

A $1,000 face value bond with a quoted price of 98 is selling for

$980

Financial information is presented below: Operating Expenses $ 90,000 Sales Returns and Allowances 18,000 Sales Discounts 12,000 Sales Revenue 320,000 Cost of Goods Sold 174,000 The gross profit rate would be

.400

Farmer Company reports the following amounts for 2015: Net income $135,000 Average stockholders' equity 500,000 Preferred dividends 15,000 Par value preferred stock 100,000 The 2015 rate of return on common stockholders' equity is

30.0%

Days in inventory is calculated by dividing

365 days by the inventory turnover ratio

Delmar Company had beginning inventory of $90,000, ending inventory of $110,000, cost of goods sold of $600,000, and sales of $960,000. Delmar's days in inventory is:

60.8 days

On July 9, Sheb Company sells goods on credit to Wooley Company for $5,000, terms 1/10, n/60. Sheb receives payment on July 18. The entry by Sheb on July 18 is:

Cash 4,950 Sales Discount 50 Accounts Receivable 5,000

On January 1, 2015, Carter Corporation issued $5,000,000, 10-year, 8% bonds at 102. Interest is payable annually on January 1. The journal entry to record this transaction on January 1, 2015 is

Cash 5,100,000 Bonds Payable 5,000,000 Premium on Bonds Payable 100k

GAAP stands for

Generally Accepted Accounting Principles

Pavement Company purchased a truck from Bee Thousand Corp. by issuing a 6-month, 8% note payable for $90,000 on November 1. On December 31, the accrued expense adjusting entry is

Interest Expense 1,200 Interest Payable 1,200

Indicate which one of the following would appear on the income statement of both a merchandising company and a service company.

Operating Expense

A credit balance in retained earnings represents

a claim on the aggregate assets of the corporation

On January 14, Edamame Industries purchased supplies of $700 on account. The entry to record the purchase will include

a debit to supplies and a credit to accounts payable

Which one of the following is not an application of revenue recognition?

accepting cash from an established customer for services to be performed over the next three months

For the basic accounting equation to stay in balance, each transaction recorded must

affect two or more accounts

Relevant accounting information

affects the decisions of its users

A post-closing trial balance is prepared

after closing entries are posted to the ledger accounts

The closing entry process consists of closing

all temporary accounts

Writing off an uncollectible account under the allowance method requires a debit to

allowance for doubtful accounts

Cost allocation of an intangible asset is referred to as

amortization

An account is a part of the financial information system and is described by all except which one of the following?

an account is a source document

The contractual interest rate is always stated as a(n)

annual rate

What is ordinarily the first step in the formation of a corporation?

application for incorporation to the appropriate secretary of state

If the market interest rate is greater than the contractual interest rate, bonds will sell

at a discount

A legal document which summarizes the rights and privileges of bondholders as well as the obligations and commitments of the issuing company is called

bond indenture

All of the following are services offered by public accountants except

budgeting

Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called

callable bonds

Dividends are predominantly paid in

cash

Transactions in a journal are recorded in

chronological order

All of the following are intangible assets except

coal reserves, research and development cost, accounts receivable

The principles of internal control include all of the following except

combining of duties

Sarbanes Oxley applies to

companies whose stock is traded on public exchange

The selling price of a $10,000, 5-year bond, will be less than $10,000 if the

contractual interest rate is less than the market interest rate

Bonds that may be exchanged for common stock at the option of the bondholders are called

convertible bonds

Which of the following would not be classified a long-term liability?

current maturities of long term debits

Companies with good credit ratings use _________________ bonds extensively.

debenture bonds

On January 15, 2015, Craig Company received a two-month, 9%, $9,000 note from William Pentel for the settlement of his open account. The entry by Craig Company on January 15, 2015 would include a:

debit of $9,000 to notes receivable

Hernandez Corporation issues 2,000, 10-year, 8%, $1,000 bonds dated January 1, 2015, at 98. The journal entry to record the issuance will show a

debit to cash for $1,960,000

All of the following are stockholders' equity accounts except

dividends payable

The market interest rate is often called the

effective rate

When common stock is issued for services or non-cash assets, cost should be

either the fair value of the consideration given up or the consideration received, whichever is more clear.

Allowing only the treasurer to sign checks is an example of

establishment of responsibility

A net loss will result during a time period when

expenses exceed revenue

The expense recognition principle matches

expenses with revenues

If the market interest rate is 10%, a $10,000, 12%, 10-year bond that pays interest annually would sell at an amount

greater than face value

Of the following companies, which one would not likely employ the specific identification method for inventory costing?

hardware company

In recording an accounting transaction in a double-entry system

in at least two different accounts

When the allowance method of accounting for uncollectible accounts is used, Bad Debt Expense is recorded

in the same year as the credit sale.

The principle of establishing responsibility does not include

independent internal verification

A debit balance in the Allowance for Doubtful Accounts

indicates that the actual bad debt write-off exceeded previous provisions for bad debt.

A term that is not synonymous with property, plant, and equipment is

intangible assets

A promissory note

is the primary evidence of a loan

Land improvements should be depreciated over the useful life of the

land improvments

After transaction information has been recorded in the journal, it is transferred to the

ledger

The interest rate investors demand for loaning funds is the

market interest rate

Matador Company purchases $1,300 of equipment from Danger Mouse Inc. for cash. The effect on the components of the basic accounting equation of Matador Company is

no change in total assets

On the dividend record date,

no entry is required

The custodian of a company asset should

not have access to the accounting records for that asset

The final closing entry to be journalized is typically the entry that closes the

owner's drawings account

At March 1, Psychocandy Inc. reported a balance in Supplies of $200. During March, the company purchased supplies for $750 and consumed supplies of $800. If no adjusting entry is made for supplies

owners equity will be overstated by $800

Control over cash disbursements is generally more effective when

payments are made by check

The existing balance in Allowance for Doubtful Accounts is considered in computing bad debt expense in the

percentage-of-receivables basis

The time period assumption is also referred to as the

periodicity assumption

The procedure of transferring journal entries to the ledger accounts is called

posting

An adjusted trial balance

proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made.

Bookkeeping differs from accounting in that bookkeeping primarily involves which part of the accounting process?

recording

Accrued revenues are

revenues that the business has earned, but not collected

Bonds that have specific assets of the issuer pledged as collateral are

secured bonds

Jolene is warehouse custodian and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates

segregation of duties is violated

When authorizing bonds to be issued, the board of directors does not specify the

selling price

Closing entries are made

so that financial statements can be prepared

Which one of the following inventory methods is often impractical to use?

specific identification

Corporations are granted the power to issue bonds through

state laws

Which depreciation method is most frequently used in businesses today?

straight-line

Under the allowance method of accounting for uncollectible accounts,

the net realizable value of accounts receivable in the balance sheet is the same before and after an account is written-off.

A complete journal entry does not show

the new balance in the account affected by the transaction

Which of the following is not true of ordinary repairs?

they increase the productive capacity of the asset

Accountants refer to an economic event as a

transaction

Bonds issued against the general credit of the borrower are called

unsecured bonds