ACC 201 Finals Review

On June 30, Year 1, the company invested $20,000 in a short-term investment that will yield 12% interest at the end of one year. A. Debit Interest Revenue $20,000 Credit Interest Receivable $20,000 B. Debit Interest Revenue $1,200 Credit Interest Receivable $1,200 C. Debit Interest Receivable $1,200 Credit Interest Revenue $1,200 D. Debit Interest Receivable $20,000 Credit Interest Revenue $20,000

C

Because interest rates have fallen, a company retires bonds which had been issued at their face value of $200,000. The company bought the bonds back at 97. The journal entry to record this retirement includes a debit of: A. $200,000 to Bonds Payable, a credit of $6,000 to Gain on Bond Retirement, and a credit of $194,000 to Cash. B. $194,000 to Bonds Payable, a debit to Gain on Bond Retirement of $6,000, and a credit of $200,000 to Cash. C. $200,000 to Bonds Payable, a credit of $6,000 to Interest Expense, and a credit of $194,000 to Cash. D. $194,000 to Bonds Payable and a credit of $194,000 to Cash.

A

Creek Co. uses the percentage of credit sales method in determining its bad debt expense. The following information comes from the accounting records of Creek Co.: Cash sales $ 300,000 Credit sales 1,200,000 Total sales 1,500,000 Credit balance in the Allowance for Doubtful Accounts 7,500 Bad debt loss rate 3% What is the estimate of bad debt expense? A. $36,000 B. $37,500 C. $43,500 D. $45,000

A

During 2016, a company provided services for cash of $21,000 and services on credit of $15,000. The company collected accounts receivable of $8,000 and incurred operating expenses of $22,700, $14,000 of which were paid during the year. The amount of net income (loss) for the year is: A. $13,300 B. ($1,700) C. $22,700 D. $6,300

A

Galveston, Inc. has 308,000 shares authorized, 140,000 shares issued, and 14,000 shares of treasury stock. How many shares are outstanding? A. 126,000 B. 434,000 C. 154,000 D. 406,000

A

Goods available for sale equals: A. Cost of Goods Sold plus ending inventory. B. Cost of Goods Sold minus ending inventory. C. Beginning inventory plus Cost of Goods Sold. D. Beginning inventory plus Purchases minus Cost of Goods Sold.

A

How can accrual adjustments for interest earned but not yet collected affect the balance sheet and the income statement? A. Accrual adjustments can increase assets and increase revenues. B. Accrual adjustments can increase liabilities and decrease expenses. C. Accrual adjustments can decrease assets and decrease expenses. D. Accrual adjustments can increase assets and increase expenses

A

If goods in transit are shipped FOB destination A. the seller has legal title to the goods until they are delivered. B. the buyer has legal title to the goods until they are delivered. C. the transportation company has legal title to the goods while the goods are in transit. D. no one has legal title to the goods until they are delivered.

A

In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the A. FIFO method B. LIFO method C. Average-cost method D. Tax method

A

On January 1, Baker Co. purchased equipment for $100,000. It has an estimated useful life of five years and its residual value is $10,000. The company has a calendar year-end. Using the straight-line method, depreciation expense for the first year of its life equals: A. $18,000. B. $20,000. C. $36,000. D. $40,000.

A

On Time Computer Repair uses accrual basis accounting. A computer was repaired on May 15. The customer picked up the computer on June 1 and mailed the payment on June 5. On Time Computer Repair received the check in the mail on June 10. The revenue should be recognized as earned on which date? A. May 15 B. August 1 C. June 5 D. June 10

A

On average, 5% of total accounts receivable has been uncollectible in the past. At the end of the year, the balance of accounts receivable is $100,000 and the allowance for doubtful accounts has an unadjusted credit balance of $500. Credit sales during the year were $150,000. Using the aging of accounts receivable method, the estimated bad debt expense would be: A. $4,500. B. $5,000. C. $7,000. D. $7,500.

A

The Tasman Company purchased land for $150,000. The cost to demolish the existing building and prepare the land for a new building was $20,000. The real estate commission paid to buy the land was $9,000. What amount should be recorded in Tasman's accounting records for the cost of the land? A. $179,000 B. $150,000 C. $159,000 D. $170,000

A

The accounts Payable account: A. Has a normal credit balance B. Is increased by a debit C. Is an asset D. Is increased when a company receives cash from customers

A

The deferral adjustment to record the amount of unearned service revenue that is now earned includes a: A. Debit to Unearned Revenue B. Credit to Unearned Revenue C. Debit to Service Revenue D. Credit to Accounts Receivable

A

Using the aging method of accounts receivable method, $5,000 of the company's Accounts Receivable are estimated to be uncollectible. At the end of the year, the balance of Accounts Receivable is $100,000 and the unadjusted credit balance of the Allowance for Doubtful Accounts is $500. Credit sales during the year totaled $150,000. What is the current year's Bad Debt Expense? A. $4,500 B. $5,000 C. $7,000 D. $7,500

A

When costs to purchase inventory are rising, using LIFO leads to reporting __ cost of goods sold and __ net income than FIFO. A. higher; lower B. higher; higher C. lower; lower D. lower, higher

A

When interest is accrued on a note payable, but not paid, the A. Interest Expense account is increased; the Interest Payable account is increased. B. Interest Expense account is decreased; the Interest Payable account is increased. C. Notes Payable account is increased; the Interest Payable account is increased. D. Interest Expense account is increased; the Interest Payable account is decreased.

A

When using a perpetual inventory system, the Cost of Goods Sold is recorded: A. each time a sale is made. B. at the end of each month. C. at the end of the accounting period. D. at the end of each day.

A

Which account will have a zero balance after closing entries have been journalized and posted? A. Service revenue. B. Supplies. C. Prepaid Insurance. D. Accumulated Depreciation

A

Which of the following financial statements is concerned with the company at a point in time? A. Balance sheet B. Income statement C. Retained earnings statement D. Statement of cash flows

A

Your company sells $50,000 of one-year, 10% bonds for an issue price of $52,000. The journal entry to record this transaction will include a credit to Bonds Payable in the amount of: A. $50,000. B. $52,000. C. $55,000. D. $57,000.

A

1. Boron Company has sales of $60,000, beginning inventory of $7,000, purchases of $35,000, and ending inventory of $5,000. The cost of goods sold is: A. $42,000 B. $37,000 C. $23,000 D. $33,000

B

A company declared a $0.80 per share cash dividend. The company has 100,000 shares authorized, 45,000 shares issued, and 42,000 shares of common stock outstanding. What is the journal entry to record the dividend declaration? A. Debit Dividends and credit Dividends Payable for $36,000 B. Debit Dividends and credit Dividends Payable for $33,600 C. Debit Dividends Payable and credit Cash for $36,000 D. Debit Dividends Payable and credit Cash for $80,000

B

A company sells goods at a selling price of $20,000. The cost of the goods is $15,000. Under a perpetual inventory system, the journal entries prepared to record the sale will include one with a debit to: A. Inventory and a credit to Sales Revenue for $15,000. B. Cost of Goods Sold and a credit to Inventory for $15,000. C. Inventory and credit to Sales Revenue for $20,000. D. Cost of Goods Sold and a credit to Sales Revenue for $15,000.

B

A corporate bond with a face value of $1,000 is issued at 107. This means that the bond actually sold for: A. $107 and the stated interest rate was higher than the market interest rate. B. $1,070 and the stated interest rate was higher than the market interest rate. C. $107 and the stated interest rate was lower than the market interest rate. D. $1,070 and the stated interest rate was lower than the market interest rate.

B

An objective of the expense recognition principle ("matching") is to have bad debt expense debited in: A. The same period that the related accounts receivable is determined to be uncollectible B. the same period the related credit sales are recorded C. a later period after the related credit sales are recorded D. the period that a customer eventually becomes bankrupt

B

Cary Inc. reported net credit sales of $430,000 for the current year. The unadjusted credit balance in its Allowance for Doubtful Accounts is $825. The company has experienced bad debt losses of 2% of credit sales in prior periods. Using the percentage of credit sales method, what amount should the company record as an estimate of Bad Debt Expense? A. $2,475 B. $8,600 C. $3,300 D. $9,425

B

How does the adjustment for depreciation differ from other deferral adjustments? A. The depreciation adjustment results in an increase to a long-lived asset account while the other deferral adjustments reduce asset accounts. B. The depreciation adjustment uses a contra-asset account rather than reducing the asset accounts directly. C. The depreciation adjustment increases a liability account rather than reducing an asset account directly. D. The depreciation adjustment is not a deferral adjustment, but rather an accrual adjustment.

B

IBM is planning to issue $1,000 bonds with a stated interest rate of 7% and a maturity date of July 15, 2022. If interest rates fall in the economy so that similar financial investments pay 5%, IBM will: A. not be able to issue the bonds because no one will buy them. B. receive a higher issue price as buyers compete for the bonds. C. have to accept a lower issue price to attract buyers. D. have to reprint the bond certificates to change stated interest rate to 5%

B

If ABC Company issues 100 of its $1,000 bonds at a price of 110, the journal entry to record the transaction includes a: A. debit to Cash of $100,000 B. credit to Premium on Bonds Payable of $10,000 C. debit to Cash of $90,000 D. debit to Discount on Bonds Payable of $10,000

B

Jimmy's Repair Shop started the year with total assets of $300,000 and total liabilities of $240,000. During the year the business recorded $630,000 in revenues, $330,000 in expenses, and dividends of $60,000. Stockholders' equity at the end of the year was A. $360,000. B. $300,000. C. $240,000. D. $270,000.

B

National Corp. has 100,000 shares authorized, 70,000 shares issued and 5,000 shares of treasury stock. How many shares does National Corp. have outstanding? A. 5,000 B. 65,000 C. 75,000 D. 95,000

B

On June 15, Oakley Inc. sells inventory on account to Sunglass Hut (SH) for $1,000, terms 2/10, n/30. On June 20, SH returns to Oakley inventory that SH had purchased for $300. On June 24, SH completely fulfills its obligation to Oakley by making a cash payment. What is the amount of cash paid by SH to Oakley? A. $680 B. $686 C. $700 D. $1,000

B

On October 1, 2015, Bill Burns borrowed $170,000 from the New National Bank on a 6-month, 6% note. Assuming no interest has been recorded yet, what is the amount of accrued interest as of December 31, 2015? A. $5,100 B. $2,550 C. $10,200 D. $7,650

B

Revenues: A. decrease assets. B. increase stockholders' equity. C. increase liabilities. D. decrease expenses.

B

The Discount on Bonds Payable account is classified as a(n): A. asset B. contra-liability C. expense D. contra-asset

B

The amount of uncollectible accounts at the end of the year is estimated to be $36,500, using the aging of accounts receivable method. The balance in the Allowance of Doubtful Accounts account is an $12,600 credit before adjustment. What is the adjusted balance of the Allowance for Doubtful Accounts at the end of the year? A. $49,100 B. $36,500 C. $23,900 D. $12,600

B

The costs assigned to the individual assets acquired in a basket purchase are based on their relative: A. historical costs. B. market values C. book values. D. depreciable costs.

B

Tonto Company purchased property for $280,000. The property included a building, equipment and land. The building was appraised at $173,600, the land at $126,000, and the equipment at $50,400. What is the amount of cost to be allocated to the building in the accounting records? A. $93,333 B. $138,880 C. $173,600 D. $280,000

B

Which of the following statements regarding issued and outstanding stock is true? A. Outstanding stock includes all stock issued by a corporation. B. Issued stock equals the sum of outstanding stock and treasury stock. C. Issued stock is equal to authorized stock. D. Outstanding stock includes stock in the hands of investors, as well as treasury stock in the hands of the corporation.

B

A company issues 1 million shares of common stock with a par value of $0.02 for $15 a share. The entry to record this transaction includes a debit to Cash for: A. $20,000 and a credit to Common Stock for $20,000. B. $15,000,000 and a credit to Common Stock for $15,000,000. C. $15,000,000, a credit to Common Stock for $20,000, and a credit to Additional Paid-in Capital for $14,980,000. D. $20,000, a debit to Capital Receivable for $14,980,000, a credit to Common Stock for $20,000, and a credit to Additional Paid-in Capital for $14,980,000.

C

A company purchased equipment for use in the business at a cost of $12,000, one-fourth was paid in cash, and the company signed a note for the balance. The journal entry to record this transaction will include a: A. debit to Notes Payable of $9,000. B. debit to Cash of $12,000. C. credit to Notes Payable of $9,000. D. debit to Equipment of $3,000.

C

A company sells a long-lived asset that originally cost $200,000 for $50,000 on December 31, 2016. The Accumulated Depreciation account had a balance of $110,000 after the current year's depreciation of $45,000 had been recorded. The company should recognize a: A. $100,000 loss on sale. B. $40,000 gain on sale. C. $40,000 loss on sale. D. $25,000 loss on sale.

C

A contra-account: A. increases the original value of the account to which it relates. B. always appears in the same column of the trial balance as the account to which it relates. C. offsets, or reduces, another account. D. reduce the asset to its fair value.

C

Ambiance Inc. buys back 3,000 shares of its $10 par value common stock from investors at $45 per share. This stock repurchase would be recorded with a debit to: A. Cash and a credit to Treasury Stock for $135,000. B. Treasury Stock and a credit to Cash for $30,000. C. Treasury Stock and a credit to Cash for $135,000. D. Treasury Stock for $30,000, a debit to Additional Paid-in Capital for $105,000, and a credit to Cash for $135,000.

C

An adjusted trial balance should be prepared immediately: A. after the financial statements, but before closing. B. before posting adjusting entries. C. after posting adjusting entries. D. after journalizing adjusting entries.

C

Closing entries: A. are prepared before financial statements are prepared. B. reduce the number of permanent accounts. C. cause the revenue and expense accounts to have zero balances. D. summarize the activity in every account.

C

Depreciation is the process of: A. valuing an asset at its fair value. B. increasing the value of an asset over the periods in which it is used. C. allocating the cost of an asset to the periods in which it is used. D. writing down an asset to its real value each accounting period.

C

Galaxy Industries buys back 600,000 shares of its stock from investors at $45 a share. Two years later it reissues this stock for $65 a share. The stock reissue would be recorded with a debit to Cash for: A. $39 million and a credit to Treasury Stock for $39 million. B. $27 million, a debit to Additional Paid-in Capital for $12 million, a credit to Treasury Stock for $27 million, and a credit to Stockholders' Equity for $12 million. C. $39 million, a credit to Treasury Stock for $27 million, and a credit to Additional Paid-in Capital for $12 million. D. $39 million, a credit to Treasury Stock for $27 million, and a credit to Gain on Sale of Treasury Stock for $12 million.

C

Holders of common stock receive certain benefits, such as a residual claim, which is the: A. right of stockholders to be paid back for their investment before anyone else if the company ceases operation. B. right to oversee management of the company. C. right to share in any remaining assets after creditors have been paid off, should the company cease operations. D. continuing right to receive a share of the company's profits in the form of dividends.

C

Holders of common stock receive certain benefits, such as a residual claim, which is the: A. right of stockholders to be paid back for their investment before anyone else if the company ceases operation. B. right to oversee management of the company C. right to share in any remaining assets after creditors have been paid off, should the company cease operations D. continuing right to receive a share of the company's profits in the form of dividends

C

If a company did not extend credit to customers: A. gross revenue would increase. B. costs would increase but so would sales revenue. C. costs would decrease but so would sales revenue. D. gross profit would increase

C

In order to calculate shrinkage: A. both periodic and perpetual inventory systems are needed. B. a periodic inventory system is more effective. C. a perpetual inventory system requires an occasional count of actual inventory. D. it does not matter which system one uses.

C

Loma Linda, Inc. sells a long-lived asset that originally cost $400,000 for $100,000 on December 31, 2018. The Accumulated Depreciation account had a balance of $220,000 after the current year's depreciation of $90,000 had been recorded. The company should recognize a: A. $200,000 loss on sale B. $80,000 gain on sale. C. $80,000 loss on sale D. $50,000 loss on sale

C

Mansfield Company has a periodic inventory system and uses the LIFO method to assign costs to inventory and cost of goods sold. Consider the following information: Date Description # of units Cost per unit January 1 Beginning inventory 100 $5 October 2 Purchase 75 $4 December 5 Sales 125 What amounts would be reported as the cost of goods sold and ending inventory balances for the period? A. Cost of goods sold $625; Ending inventory $175 B. Cost of goods sold $755; Ending inventory $225 C. Cost of goods sold $550; Ending inventory $250 D. Cost of goods sold $600; Ending inventory $200

C

On August 1, Jackson Radiology signed a one-year note receivable of $60,000 with interest at of 15% payable every six months. Jackson properly accrued interest on the note on December 31. What journal entry would Jackson make on the following February 1 to record the interest payment received on that date? A. Debit Cash and credit Interest Revenue for $4,500. B. Debit Cash and credit Interest Revenue for $750. C. Debit Cash for $4,500, credit Interest Receivable for $3,750, and credit Interest Revenue for $750. D. Debit Cash for $750, debit Interest Receivable for $3,750, and credit Interest Revenue for $4,500

C

On February 16, Hawthorne Co. declares a $1.36 dividend to be paid on April 5. There are 1,900,000 shares of common stock issued and outstanding. The entry recorded by the company on April 5 includes a debit to: A .A debit to Dividends Payable and a credit to Cash for $2,720,000 B. A debit to Dividends and a credit to Dividends Payable for $2,584,000 C. A debit to Dividends Payable and a credit to Cash for $2,584,000. D. A debit to Dividends and a credit to Dividends Payable for $2,720,000

C

On July 1, 2016, Empire Inc. lends $9,000 to a customer and receives a 12% note due in two years. Interest is due in full on July 1, 2018, the due date of the note. What is the amount of Interest Revenue that will be reported on Empire's income statement for the year ended December 31, 2016?the assets, liabilities, and stockholders' equity of a company. A. $2,160 B. $1,080 C. $540 D. $630

C

On July 1, Darin Company sold inventory costing $4,500 to Dee Company for $6,000, terms 2/10, n/30. Both companies use the gross method. What journal entry will be recorded by Dee Company on July 1? A. Debit Purchases and credit Accounts Payable for $6,000 B. Debit Inventory and credit Accounts Receivable for $6,000 C. Debit Inventory and credit Accounts Payable for $6,000 D. Debit Cost of Goods Sold and credit Inventory for $4,500

C

Purrfect Pets, Inc. makes a $10,000 payment on account. This would result in a: A. $10,000 credit to Cash and a $10,000 credit to Accounts Payable. B. $10,000 debit to Cash and a $10,000 debit to Accounts Payable. C. $10,000 debit to Accounts Payable and a $10,000 credit to Cash. D. $10,000 debit to Cash and a $10,000 credit to Accounts Payable.

C

Revenues are recognized when __, even when cash is collected in a different accounting period than the revenue is earned. A. cash is collected B. bills are paid C. services are performed D. customers prepay for goods/services

C

Total doubtful accounts at the end of the year are estimated to be $27,500 based on an aging of accounts receivable. If the balance in the Allowance for Doubtful Accounts is a $8,500 debit before adjustment, what is current year's Bad Debt Expense? A. $27,500 B. $19,000 C. $36,000 D. $ 8,500

C

When a deferral adjustment is made to an liability account, that liability becomes a(n) A. Liability B. Other Asset C. Revenue D. Expense

C

Which of the following is an advantage of debt financing? A. It does not have to be repaid. B. Interest is discretionary. C. Interest is tax deductible. D. It reduces stockholder control.

C

A company acquired property that included land, building and equipment for a total cost of $163,000. The land was appraised at $87,500, the building at $35,000, and the equipment at $52,500. What should be the allocation of the total cost in the accounting records? A. Land $75,000; Building $30,000; Equipment $45,000 B. Land $75,000; Building $30,800; Equipment $46,200 C. Land $87,500; Building $35,000; Equipment $52,500 D. Land $81,500; Building $32,600; Equipment $48,900

D

A company receives $102,000 when it issues a bond with a face value of $100,000 and a stated interest rate of 7%. Which of the following statements is correct? A. The entry to record the issuance will include a credit to Bonds Payable for $102,000. B. The market interest rate is 7%. C. The annual interest expense is $7,000. D. The carrying value of the bonds will be $100,000 at maturity.

D

A contingent liability is: A. always a specific amount. B. an obligation arising from the purchase of goods or services on credit. C. an obligation not requiring a future payment. D. a potential obligation that depends on a future event.

D

A credit is not the normal balance for which account listed below? A. Common Stock account B. Revenue account C. Liability account D. Dividends account

D

Ace Electronics bought a new cash register for $2,500. Ace plans to use the cash register for 4 years and then sell it for $200. The cash register's depreciable cost equals: A. $2,500. B. $200. C. $575. D. $2,300.

D

Although there are some clear disadvantages associated with extending credit to customers, such as bad debt costs, most managers believe a particular advantage outweighs the costs. To which primary advantage do they refer? A. Increased labor costs B. Increased bad debt expense. C. Delayed receipt of cash D. Additional sales revenue

D

Durango, Inc. purchased a parcel of land for $450,000. It paid attorney fees of $3,000 to verify title to the land. In addition, it paid a broker's fee of $7,500 to help find a suitable parcel of land. This parcel of land should be recorded in the accounting records for: A. $450,000 B. $453,000 C. $457,500 D. $460,500

D

Goodwill: A. should be treated like most other intangible assets and amortized over a useful life of not more than 40 years. B. is an accounting measurement of how well a company's employees behave towards the company's customers. C. should be recorded as a negative value if a company is purchased for less than the net carrying value of its assets. D. is recorded when the purchasers of a business pay more than the fair value of the assets purchased.

D

Harney Inc. uses the percentage of credit sales method of estimating doubtful accounts. The Allowance for Doubtful Accounts has an unadjusted credit balance of $5,300 and the company had $270,000 of net credit sales during the period. Harney has experienced bad debt losses of 3% of credit sales in prior periods. After making the adjusting entry for estimated bad debts, what is the ending balance in the Allowance for Doubtful Accounts account? A. $8,100. B. $10,600. C. $2,800. D. $13,400.

D

If a company's ending inventory count was $50,000, cost of goods sold was $27,000, and purchases were $56,000, its beginning inventory must have been: A. $33,000. B. $133,000. C. $79,000. D. $21,000.

D

Kata Company uses the allowance method. On May 1, Kata wrote off a $22,000 customer account balance when it becomes clear that the particular customer will never pay. The journal entry to record the write-off on May 1 would include which of the following? A. Debit to Bad Debt Expense and credit to Allowance for Doubtful Accounts. B. Debit to Accounts Receivable and credit to Allowance for Doubtful Accounts. C. Debit to Allowance for Doubtful Accounts and credit to Bad Debt Expense. D. Debit to Allowance for Doubtful Accounts and credit to Accounts Receivable

D

Maxell Company uses the FIFO method to assign costs to inventory and cost of goods sold. The company uses a periodic inventory system. Consider the following information: Date Description # of units Cost per unit January 1 Beginning inventory 100 $5 June 2 Purchase 75 $4 November 5 Sales 125 What amounts would be reported as the cost of goods sold and ending inventory balances for the year? A. Cost of goods sold $625; Ending inventory $175 B. Cost of goods sold $755; Ending inventory $225 C. Cost of goods sold $550; Ending inventory $250 D. Cost of goods sold $600; Ending inventory $200

D

McLeod Corporation is a merchandising company. The year began with inventory of $27,000, Purchases for the year were $52,000, and the Ending Inventory was $14,000.What is the Cost of Goods Sold that would be reported on the income statement? A. $93,000 B. $39,000 C. $11,000 D. $65,000

D

The Payroll records of Oregon Mist contained the following information for the month of November: Salaries $ 350,000 FICA Taxes - Employee 21,700 FICA Taxes - Employer 21,700 Federal Unemployment Taxes 3,500 State Unemployment Taxes 1,750 The journal entry to record the monthly Payroll Tax Expense would include a: A. debit to Payroll Tax Expense of $25,200 B. credit to FICA Taxes Payable of $43,400 C. debit to Payroll Tax Expense of $48,650 D. debit to Payroll Tax Expense of $26,950

D

The adjusting entry to record the estimated bad debts in the period credit sales occur includes a debit to an: A. asset account and a credit to a liability account. B. expense account and a credit to an asset account. C. expense account and a credit to a revenue account. D. expense account and a credit to a contra-asset account

D

The adjusting entry to record the estimated bad debts in the period credit sales occur includes a debit to an:? A. Asset account and a credit to a liability account B. Expense account and a credit to an asset account C. Expense account and a credit to a revenue account D. Expense account and credit to a contra-asset account

D

The best definition of assets is the A. Cash owned by the company. B. collections of resources belonging to the company and the claims on these resources. C. owners' investment in the business. D. resources belonging to a company that have future benefit to the company.

D

The expense recognition principle ("matching") dictates: A. where on the income statement expenses should be presented. B. when revenues are recognized on the income statement. C. the ordering of current assets and current liabilities on the balance sheet. D. when costs are recognized as expenses on the income statement.

D

The primary source used in the preparation of the financial statements is the: A. Trial balance. B. post-closing trial balance. C. general trial balance. D. adjusted trial balance

D

The specific identification method would probably be most appropriate for which of the following goods? A. Boxes of brass 4-inch drywall screws at Home Depot B. Bottles of suntan lotion in Wal-Mart's central warehouse C. Sets of tires at the Goodyear plant D. Diamond necklaces at a Tiffany & Co. jewelry store

D

The stockholders' equity section of the balance sheet includes all of the following except: A. Retained Earnings. B. Contributed Capital. C. Treasury Stock. D. Dividends

D

Tony's Market recorded the following events involving a recent purchase of inventory: Received goods for $80,000, terms 2/10, n/30. Returned $1,600 of the shipment for credit. Paid $400 freight on the shipment. Paid the invoice within the discount period. As a result of these events, the company's inventory A. increased by $76,832. B. increased by $78,800. C. increased by $77,224. D. increased by $77,232.

D

Travis County Bank agrees to lend Brickyard Corporation $200,000 on January 1. Brickyard signs a $200,000, 4%, 9-month note. Interest is due at maturity on September 30. The company's fiscal year ends June 30 and adjusting entries are recorded at that time only. What journal entry will Brickyard make when paying the interest at maturity? A. Debit Notes Payable and credit Cash for $206,000. B. Debit Interest Expense for $4,000, and credit Cash for $4,000. C. Debit Interest Expense for $6,000 and Cash for $206,000 D. Debit Interest Payable for $4,000, debit Interest Expense for $2,000, and credit Cash for $6,000

D

When a deferral adjustment is made to an asset account, that asset becomes a(n) A. Liability B. Other Asset C. Revenue D. Expense

D

When goods are sold to a customer with credit terms of 2/15, n/30, the customer will receive a: A. 15% discount if they pay within 2 days. B. 2% discount if they pay 15% of the amount due within 30 days. C. 15% discount if they pay within 30 days. D. 2% discount if they pay within 15 days.

D

During June, the Grass Is Greener Company mows 100 lawns a week; the company bills customers and full payment is due by July 15. The company uses the accrual basis of accounting. How will these events affect the company's financial statements? A) In June, an asset and a liability account will both increase. B) In June, an asset and a revenue account will both increase. C) In July, an asset account will increase and a liability account will decrease. D) In July, a liability account will decrease and a revenue account will increase.

B

Expenses are reported on the: A) income statement in the time period in which they are paid. B) income statement in the time period in which they are incurred. C) balance sheet in the time period in which they are paid. D) balance sheet in the time period in which they are incurred.

B

Extraordinary repairs: A. are revenue expenditures. B. extend an asset's life beyond the original estimate. C. are expensed as incurred. D. are credited to Accumulated Depreciation.

B

Financing that individuals or institutions have provided to a corporation is: A) always classified as a liability. B) classified as a liability when provided by creditors and as stockholders' equity when provided by owners. C) always classified as equity. D) classified as a stockholders' equity when provided by creditors and a liability when provided by owners.

B

Deana's Decorating had $1,800 of supplies on hand on December 1, Year 1. When counting the supplies on December 31, Year 1, Deana's found only $800 worth of supplies on hand. A. Debit Supplies $1,000 Credit Supplies Expense $1,000 B. Debit Supplies Expense $1,000 Credit Supplies $1000 C. Debit Supplies $1800 Credit Supplies Expense $1800 D. Debit Supplies Expense $800 Credit Supplies $800

B

Deana's had paid $6,000 for one year's insurance on June 1, Year 1. A. Debit Insurance Expense $6,000 Credit Prepaid Insurance $6,000 B. Debit Insurance Expense $3,500 Credit Prepaid Insurance $3,500 C. Debit Prepaid Insurance $6000 Credit Insurance Expense $6000 D. Debit Prepaid Insurance $3500 Credit Insurance Expense $3500

B

Which of the following accounts has a normal credit balance? A) Accounts Receivable B) Equipment C) Utilities Expense D) Deferred Revenue

D

Which of the following are the three basic elements of the balance sheet? A) Assets, liabilities, and retained earnings. B) Assets, liabilities, and common stock. C) Assets, liabilities, and revenues. D) Assets, liabilities, and stockholders' equity.

D

Which of the following expressions of the accounting equation is correct? A) Liabilities + Assets = Stockholders' Equity B) Stockholders' Equity + Assets = Liabilities C) Assets = Liabilities - Stockholders' Equity D) Stockholders' Equity = Assets - Liabilities

D

Which of the following is typically considered a disadvantage of sole proprietorships? A. Income taxes are paid by both the business and its owner B. The business is considered a separate legal entity from its owner C. Establishing the business usually requires legal assistance D. Owner is personally liable for all debts of the business

D

Which of the following journal entries would decrease stockholders' equity? A) Debit Prepaid Insurance and credit Cash. B) Debit Deferred Revenue and credit Service Revenue. C) Debit Supplies and credit Accounts Payable. D) Debit Insurance Expense and credit Cash.

D

Which of the following requires a credit? A) Decreases in liabilities B) Decreases in stockholders' equity C) Increases to assets D) Increases to liabilities

D

Which of the following would be properly classified as a long-lived asset? A. A car held for resale by an automobile dealership. B. Accounts receivable. C. Merchandise inventory held for resale. D. A warehouse used to store inventory.

D

Which of the following would eventually cause Retained Earnings to increase? A) Receiving cash for services provided in a prior month B) Incurring utilities that will be paid for next month C) Receiving cash for services to be provided next month D) Performing services for which cash will be received next month

D

Which of the following would not represent a financing activity? A) Paying dividends to stockholders. B) An investment of capital by the owners. C) Borrowing money from a bank to purchase new equipment. D) Buying supplies.

D

1. Somerdale Corp. received an order from a customer on November 10. It manufactured the ordered items on November 15, shipped the goods on November 17, and received payment on December 2. Under the accrual basis of accounting, Somerdale should record revenue in:

November 17

Which of the following accounts does not have a normal credit balance? A) Common Stock B) Notes Payable C) Deferred Revenue D) Equipment

D

In April, the Surf and Sand Hotel books and accepts a cash payment for $25,600 for vacation services to be provided during in July. The journal entry recorded in April will include a debit to: A) Debit Prepaid Insurance and credit Cash. B) Debit Deferred Revenue and credit Service Revenue. C) Debit Supplies and credit Accounts Payable. D) Debit Insurance Expense and credit Cash.

A

In a classified balance sheet, assets and liabilities are classified according to whether they are current or noncurrent. Which of the following statements is not correct about current assets? A. They will be acquired within one year. B. They will be converted to cash within one year. C. They will be sold within one year. D. They will be used up within one year.

A

In accordance with the expense recognition principle, expenses are recorded in the period when the: A) related revenues are recorded. B) cash is paid. C) related assets are recorded. D) contract and performance obligations are identified.

A

1. Sales Discounts is a ______ account with a normal ______ balance. A. contra-asset; debit B. contra-revenue; credit C. contra-asset; credit D. contra-revenue; debit

D

On January 1, Weldon Weston Co. purchased equipment for $250,000. It has an estimated useful life of five years and its residual value is $25,000. The company has a calendar year-end. Using the straight-line method, depreciation expense for the first year of its life equals: A. $45,000 B. $50,000 C. $90,000 D. $100,000

A

A 1-year, $15,000, 12 percent note is signed on April 1. If the note is repaid on September 1 of the same year, how much interest expense is incurred? A. $1800 B. $900 C. $750 D. $600

C

1. Consider the following journal entry: Software 18,000 Cash 7,200 Note Payable 10,800 Which of the following explanations best describes this journal entry? A) The company buys $18,000 of software, pays cash of $7,200, and signs a note for $10,800. B) The company receives $7,200 in cash and $10,800 in notes payable in exchange for selling $18,000 of software. C) The company buys $18,000 of software, pays $7,200 cash, and promises to cancel a debt owed to the company in the amount of $10,800. D) The company sells $18,000 of software, receives $7,200 in cash, and pays off $10,800 it owes on the software.

A

A company uses $100,000 in cash to pay off $100,000 in notes payable. This would result in a: A) $100,000 debit to Notes Payable and a $100,000 credit to Cash. B) $100,000 credit to Cash and a $100,000 credit to Notes Payable. C) $100,000 debit to Cash and a $100,000 credit to Notes Payable. D) $100,000 debit to Cash and a $100,000 debit to Notes Payable.

A

A legal document called a stock certificate is used to indicate ownership in a: A. Corporation. B. Sole proprietorship. C. Partnership. D. Both sole proprietorship and partnership.

A

Alpha sold $2,000 of services to Beta on credit. Beta promised to pay for it next month. Alpha will report a $2,000: A) Accounts Receivable. B) Account Payable. C) increase in Cash, since Beta is sure to pay next month. D) net loss.

A

An example of an account that could be included in an accrual adjustment for revenue is: A) Interest Receivable. B) Interest Payable. C) Unearned Revenue. D) Cash.

A

An increase in revenue always: A) increases stockholders' equity B) increases assets C) decreases stockholders' equity D) decreases assets.

A

At the beginning of its first year of operations, Henry Corp. purchased $5,000 of supplies, which were debited to the Supplies account. It did not purchase any other supplies during the year. At the end of the year, it has $1,000 of supplies left. The appropriate adjusting journal entry is: A) Debit Supplies Expense $4,000 and credit Supplies $4,000 B) Debit Supplies $4,000 and credit Supplies Expense $4,000 C) Debit Supplies $1,000 and credit Supplies Expense $1,000 D) Debit Supplies Expense $1,000 and credit Supplies $1,000

A

Beyer Company bought inventory from Sellar Company, FOB destination. On December 31, the last day of the accounting year, the goods were on a truck owned by Common Carrier, Inc., and not expected to arrive until January 2. Which company should include these goods in its December 31 inventory? A. Sellar B. Beyer C. Common Carrier D. None of them should include these goods in inventory.

A

Deana's had paid $12,000 for six months' rent on November 1, Year 1. As of December, 31, Year 1, two months' (November & December) prepaid rent has expired. A. Debit Rent Expense $4,000 Credit Prepaid Rent $4,000 B. Debit Rent Expense $12,000Credit Prepaid Rent $12,000 C. Debit Prepaid Rent $4,000Credit Rent Expense $4,000 D. Debit Prepaid Rent $12,000Credit Rent Expense $12,000

A

During 2018, a company provided services for cash of $33,600 and services on credit of $24,000. The company collected accounts receivable of $12,800 and incurred operating expenses of $36,320, $22,400 of which were paid during the year. The amount of net income (loss) for the year is: A. $21,280. B. $2,720. C. $36,320. D. $10,080.

A

During February, Blake Building Co. billed a customer $4,500 for services performed during February. During March, Blake collected the $4,500. Which of the following statements about this transaction is correct? A) $4,500 of revenue should be recorded in February. B) $2,250 of revenue should be recorded in February and $2,250 in March. C) $4,500 of revenue should be recorded in March. D) No revenue should be recorded for these events because they relate only to the balance sheet.

A

Golden Enterprises started the year with the following: Assets $50,000; Liabilities $15,000; Common Stock $30,000; Retained Earnings $5,000. During the year, the company earned revenue of $2,500, all of which was received in cash, and incurred expenses of $1,500, all of which were unpaid as of the end of the year. In addition, the company paid dividends of $500 to owners. Assume no other activities occurred during the year. What was the amount of Golden's net income for the year? A) $1,000 B) $500 C) $1,500 D) $2,500

A

A company issued 600 shares of $50 par value stock for $45,000. What is the total amount of contributed capital? A. $30,000 B. $15,000 C. $45,000 D. $50

C

A debit would make which of the following accounts increase? A) Common Stock B) Inventory C) Notes Payable D) Retained Earnings

B

The company borrowed a note payable from the bank for $30,000 on January 1, Year 1, due with all interest on June 30, Year 2. The note payable requires 10% interest. A. Debit Interest Expense $3,000 Credit Interest Payable $3,000 B. Debit Interest Payable $3,000 Credit Interest Expense $3,000 C. Debit Interest Expense $30,000 Credit Interest Payable $30,000 D. Debit Interest Payable $30,000 Credit Interest Expense $30,000

A

The deferral adjustment to record the amount of deferred service revenue that is now earned includes a: A) debit to Deferred Revenue B) credit to Deferred Revenue C) debit to Service Revenue D) credit to Accounts Receivable

A

The owner is not responsible for the entity's taxes and debts if the entity is organized as a(n): A) corporation B) sole proprietorship. C) unlimited liability corporation. D) limited liability corporation.

A

Which of the following financial statements shows how net income (loss) and dividends impacted a stockholders' equity account? A) Statement of Retained Earnings B) Balance Sheet C) Statement of Cash Flows D) Income Statement

A

Which of the following is an operating activity? A) Billing customers for services rendered but not yet paid for B) Paying off a loan to the bank C) Purchasing equipment for cash D) Receiving cash investments from owners

A

Your company receives advance payment in October for services that are provided during November. Which of the following statements is correct? A) A liability is recorded in October and revenue will be recorded in November. B) Revenue is recorded in October and an expense will be recorded in November. C) An expense is recorded in October and revenue will be recorded in November. D) Revenue and expenses are recorded in October.

A

11. Under the periodic inventory system: A) inventory records are updated immediately after each purchase. B) inventory must be counted at the end of each accounting period. C) inventory does not have to be counted. (It can be taken from the accounting records.) D) inventory levels must be counted every day.

B

8. The Sales Revenue account has a credit balance of $367,200 at year end. After the closing entries have been posted, the account will: A) have a debit balance of $367,200. B) have a zero balance. C) still have a credit balance of $367,200. D) be removed entirely from the general ledger.

B

A company reports Equipment on its classified balance sheet. The balance of the Accumulated Depreciation account appears on a classified balance sheet as: A) an addition to arrive at the amount of Equipment, Net. B) a subtraction to arrive at the amount of Equipment, Net C) part of Total Liabilities section. D) a subtraction in the Total Liabilities section.

B

Advantages of equity financing over debt financing include that: A. dividends are mandatory. B. equity financing does not require repayment C. dividends are tax deductible D. stockholders' control will increase

B

All of the following accounts will have zero balances on a post-closing trial balance except: A. Dividends. B. Accumulated Depreciation. C. Salaries and Wages Expense. D. Sales Revenue.

B

An example of an account that could be included in an accrual adjustment for expense is: A) Accounts Receivable. B) Interest Payable. C) Prepaid Insurance. D) Accumulated Depreciation.

B

Which is the first financial statement that should be prepared after the adjusted trial balance has been prepared? A. Balance Sheet B. Income Statement C. Statement of Cash Flows D. Statement of Retained Earnings

B

Which of the following September transactions would impact the September income statement? A) Collecting cash related to an account receivable B) Providing services to new customers C) Purchasing supplies D) Issuing stock to new shareholders

B

If total liabilities decreased by $50,000 and stockholders' equity increased by $10,000 during a period of time, then total assets must change by what amount and direction during that same time period? A) $40,000 increase B) $40,000 decrease C) $60,000 increase D) $60,000 decrease

B

In a period of rising prices, the inventory costing method that will cause the company to have the lowest cost of goods sold is: A. LIFO. B. FIFO. C. Weighted average. D. Specific identification.

B

In its first year of business, Declan Industries earned $175,000 of revenues of which $140,000 was collected. It also incurred $157,500 in expenses for which $140,000 was paid. Which of the following statements are correct? A) Declan should use cash basis accounting for external reporting purposes as required under GAAP and IFRS. B) Declan should report net income of $17,500 for external reporting purposes. C) Declan should report $0 net income for external reporting purposes. D) Declan should report net income of $35,000 for external reporting purposes.

B

The company calculated its income taxes as $26,110 for the year ended December 31, Year 1. A. Debit Income Tax Payable $26,110 Credit Income Tax Expense $26,110 B. Debit Income Tax Expense $26,110 Credit Income Tax Payable $26,110 C. Debit Income Tax Payable $13,055 Credit Income Tax Expense $13.055 D. Debit Income Tax Expense $13,055 Credit Income Tax Payable $13,055

B

The financial statement that reports revenues and expenses is the: A) statement of retained earnings. B) income statement. C) balance sheet. D) statement of cash flows.

B

The prepayment of rent for the next three months (not including this month): A) reduces total assets. B) has no effect on total assets. C) increases expenses. D) decreases stockholders' equity.

B

West Corporation issued a $100 gift card. What journal entry will West Corporation record? A) Debit Cash and credit Sales Revenue for $100. B) Debit Cash and credit Deferred Revenue for $100. C) Debit Deferred Revenue and credit Cash for $100. D) Debit Accounts Receivable and credit Cash for $100.

B

What does the current ratio measure? A) The relative proportion of current versus noncurrent assets B) Whether current assets are sufficient to pay current liabilities C) The speed which current assets can be converted to cash D) Whether cash is sufficient to pay current liabilities

B

Which financial statement reports the dividends during the current accounting period? A) Dividends are reported on the Income Statement. B) Dividends are reported on the Statement of Retained Earnings. C) Dividends are reported on the Balance Sheet. D) Dividends are not reported on any of the financial statements.

B

Your company is planning to issue $1,000 bonds with a stated interest rate of 7% and a maturity date of July 15, 2022. If interest rates fall in the economy so that similar financial investments pay 5%, your company will: A. not be able to issue the bonds because no one will buy them. B. receive a higher issue price as buyers compete for the bonds. C. have to accept a lower issue price to attract buyers. D. have to reprint the bond certificates to change stated interest rate to 5%.

B

A current asset is one that the company: A) has owned for over one year. B) has owned for over five years. C) will use up or convert into cash in less than 12 months. D) has updated to reflect its current value.

C

Assume a periodic inventory system is used. The LIFO inventory costing method assumes that the cost of the units most recently purchased is the: A) last to be assigned to cost of goods sold. B) first to be assigned to ending inventory. C) first to be assigned to cost of goods sold. D) last to be assigned to units available for sale

C

Expenses are: A) equal to a company's liabilities. B) always less than revenues. C) the costs of doing business that are necessary to earn revenue. D) always less than the amount of cash a company has available.

C

In November, Ellie Company bought supplies on account for $480, with payment due to the supplier in 90 days. The supplies were used for products made and delivered in November. In which month should Ellie Company record the cost of the supplies as an expense? A) One-third should be expensed in each month from November through the January payment date. B) January. C) November. D) December

C

Managerial accounting reports prepared for internal use are used by the company's: A) suppliers. B) bank. C) employees. D) stockholders.

C

On July 1, Darin Company sold inventory costing $4,500 to Dee Company for $6,000, terms 2/10, n/30. Both companies use a perpetual inventory system. What journal entry will be recorded by Dee Company on July 1 assuming they use the gross method? A) Debit Purchases and credit Accounts Payable for $6,000 B) Debit Inventory and credit Accounts Receivable for $6,000 C) Debit Inventory and credit Accounts Payable for $6,000 D) Debit Cost of Goods Sold and credit Inventory for $4,500

C

The company had acquired equipment costing $40,000 on January 1, Year 1. The depreciation on this equipment was calculated to be $2,000 for Year 1. A. Debit Depreciation Expense $40,000 Credit Accumulated Depreciation $40,000 B. Debit Accumulated Depreciation $40,000 Credit Depreciation Expense $40,000 C. Debit Depreciation Expense $2,000 Credit Accumulated Depreciation $2,000 D. Debit Accumulated Depreciation $2,000 Credit Depreciation Expense $2,000

C

The company uses up $5,000 of an existing asset and the company adjusts its accounts accordingly. This is an example of a(n): A) accrual adjustment. B) closing adjustment. C) deferral adjustment. D) unethical adjustment.

C

The creditors' claims to a company's resources are represented by: A) common stock. B) total stockholder's equity. C) total liabilities. D) retained earnings.

C

Which of the following statements is correct? A) FIFO results in a lower net income than LIFO when costs are rising. B) LIFO results in a higher net income than FIFO when costs are rising. C) LIFO results in a higher net income than FIFO when costs are falling. D) LIFO results in the same net income as FIFO when costs are rising.

C

Which of the following will occur when inventory costs are decreasing? A. FIFO will result in a lower net income but a higher ending inventory than will LIFO. B. FIFO will result in a higher net income but a lower ending inventory than will LIFO. C. FIFO will result in a lower net income and a lower ending inventory than will LIFO. D. FIFO will result in a higher net income and a higher ending inventory than will LIFO.

C

Which one of the following is not a current asset? A) Cash B) Supplies C) Equipment D) Prepaid Insurance

C

Adjusting entries affect: A) only balance sheet accounts. B) only income statement accounts. C) only statement of cash flow accounts. D) both income statement and balance sheet accounts

D

Deferred Revenue is a(n): A) expense. B) asset. C) revenue. D) liability.

D

During the first year of operations, a company sold $80,000 of goods to customers and received $72,000 in cash from customers. The remainder is owed to the company at the end of the year. The company incurred $56,000 in expenses for the year and paid $52,000 in cash for these expenses. The remainder is owed by the company at the end of the year. Based on this information, what is the amount of net income for the year? A) $20,000 B) $28,000 C) $16,000 D) $24,000

D

If merchandise purchased on credit is returned to the seller for a full refund, what would be the effect on the accounts listed below? A) Increase Inventory; No effect on Cost of Goods Sold; Decrease Accounts Payable B) Decrease Inventory; Decrease Cost of Goods Sold; No effect on Accounts Payable C) No effect on Inventory; Decrease Cost of Goods Sold; Decrease Accounts Payable D) Decrease Inventory; No effect on Cost of Goods Sold; Decrease Accounts Payable

D

Investing activities on the statement of cash flows arise from transactions: A) with lenders, borrowing and repaying cash B) with stockholders, selling company stock and paying dividends C) directly related to running the business to earn profits D) related to buying or selling productive resources with long lives

D

Net income appears on which of the following financial statements? A) Balance sheet and income statement B) Balance sheet and statement of retained earnings C) Balance sheet and statement of cash flows D) Income statement and statement of retained earnings

D

On December 1, Year 1, the company had sold $500 in gift certificates for decorating services to a customer. On December 31, Year 1, the accountant received an envelope containing $400 worth of redeemed gift certificates for services provided that are not yet recorded in the company's books. A. Debit Deferred Revenue $500 Credit Service Revenue $500 B. Debit Service Revenue $500 Credit Deferred Revenue $500 C. Debit Service Revenue $400 Credit Deferred Revenue $400 D. Debit Deferred Revenue $400 Credit Service Revenue $400

D

Shaylee, Inc. borrowed $62,000 from a bank, depositing those funds in its bank account and signing a formal agreement to repay the loan in two years. What is the correct journal entry for this transaction? A) Debit notes payable and credit cash for $62,000 B) Debit notes payable and debit cash for $62,000 C) Credit notes payable and credit cash for $62,000 D) Debit cash and credit notes payable for $62,000

D

Temporary accounts are closed at what stage of the accounting process? A) At the time that adjustments are made. B) After adjustments are made and before the income statement is prepared. C) After the income statement and the statement of retained earnings are prepared, but before the balance sheet is prepared. D) As the last journal entries at the end of each accounting year.

D

The Publish or Perish Printing Company paid a dividend to stockholders. This will be reported on the: A) audit report. B) income statement. C) balance sheet. D) statement of retained earnings.

D

The Smith Corp. began business this year and entered into the following transactions during the year. The company issued common stock in exchange for cash of $80,000 from stockholders, borrowed $40,000 from a bank, bought $12,000 of inventory on account, and purchased $32,000 of equipment by paying $12,000 in cash and issuing a note for the remainder. What is the amount of total assets to be reported on the balance sheet at the end of the year? A) $104,000 B) $120,000 C) $128,000 D) $152,000

D

The obligations and debts of a business are referred to as: A) equities. B) assets. C) dividends. D) liabilities.

D

The specific identification method would probably be most appropriate for which of the following goods? A) Boxes of brass 4-inch drywall screws at Home Depot B) Bottles of suntan lotion in Wal-Mart's central warehouse C) Sets of tires at the Goodyear plant D) Diamond necklaces at a Tiffany & Co. jewelry store

D

Which inventory system updates the inventory account only at the end of the accounting period? A) LIFO B) Perpetual C) FIFO D) Periodic

D