Accounting 201 4,5,6

The expense recognition principle matches: a. customers with businesses. b. expenses with revenues. c. assets with liabilities. d. creditors with businesses

b. expenses with revenues.

Conway 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 Conway Company pays within the discount period? A. $9,000 B. $8,820 C. $8,100 D. $8,280

$8,820 ----------- $9,000 X 2.0 % = $180 $9,000 - $180 = $8,820 OR $9,000 X .98 = $8,820

This information relates to Crisp Co. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) 1. On April 5, purchased merchandise from Frost Company for $27,200, terms 4/10, n/30. 2. On April 6, paid freight costs of $640 on merchandise purchased from Frost. 3. On April 7, purchased equipment on account for $33,300. 4. On April 8, returned $5,100 of April 5 merchandise to Frost Company. 5. On April 15, paid the amount due to Frost Company in full.

1. On April 5, purchased merchandise from Frost Company for $27,200, terms 4/10, n/30. April 5 Inventory $27,000 Accounts Payable $27,000 On April 6, paid freight costs of $640 on merchandise purchased from Frost April 6 Inventory $640 Accounts Payable $640 On April 7, purchased equipment on account for $33,300. April 7 Equipment $33,300 Accounts Payable $33,300 On April 8, returned $5,100 of April 5 merchandise to Frost Company. April 8 Accounts Payable $5,100 Inventory $5,100 On April 15, paid the amount due to Frost Company in full. April 15 Accounts Payable $22,100 Cash $21,216 Inventory $884

An accounting time period that is one year in length is called? A. A fiscal year B. An interim period C. The time period assumption D. A reporting period

A fiscal year

Which of the following would not be classified as a contra account? A. Sales Revenue B. Sales Returns and Allowances C. Accumulated Depreciation D. Sales Discounts

A. Sales Revenue

The following accounts with debit balances are included on the year end trial balance of a company: Prepaid advertising $2,000; advertising expense $5,000. If it is determined that the cost of advertising applicable to future periods is $1,500, the correct adjusting entry is: A. Debit advertising expense $500; credit prepaid advertising $500 B. Debit advertising expense $1,500; credit prepaid advertising $1,500 C. Debit prepaid advertising $3,000; credit advertising expense $3,000 D. Debit prepaid advertising $500; credit advertising expense $500 4

A. The prepaid advertising account needs to be decreased to the desired balance. Thus a credit of $500 to prepaid advertising (2,000 current balance,$1,500 desired balance) and a debit of $500 to advertising expense would be the correct adjusting entry.

The collection of a $1,000 account within the 2 percent discount period will result in a A. debit to Sales Discount for $20 C. credit to Cash for $980 B. debit to Accounts Receivable for $980 D. credit to Accounts Receivable for $980

A. debit to Sales Discount for $20

At the beginning of the current season on April 1, the ledger of Flint Hills Pro Shop showed Cash $2,980; Inventory $3,500; and Common Stock $6,480. The following transactions were completed during April 2014. Apr. 5 Purchased golf bags, clubs, and balls on account from Akers Co. $2,300, terms 3/10, n/60. 7 Paid freight on Akers purchase $80. 9 Received credit from Akers Co. for merchandise returned $700. 10 Sold merchandise on account to members $1,420, terms n/30. The merchandise sold had a cost of $740. 12 Purchased golf shoes, sweaters, and other accessories on account from Palmer Sportswear $920, terms 1/10, n/30. 14 Paid Akers Co. in full. Received credit from Palmer Sportswear for merchandise returned $120. Made sales on account to members $830, terms n/30. The cost of the merchandise sold was $550. 21 Paid Palmer Sportswear in full. 27 Granted an allowance to members for clothing that did not fit properly $90. 30 Received payments on account from members $1,400.

APR. 5 Purchased golf bags, clubs, and balls on account from Akers Co. $2,300, terms 3/10, n/60. Apr. 5 Inventory 2,300 Accounts Payable $2,300 Apr. 7 Paid freight on Akers purchase $80. Apr. 7 Inventory 80 Cash $80 April 9 Received credit from Akers Co. for merchandise returned $700. Apr. 9 Accounts Payable 700 Inventory $700 April 10 Sold merchandise on account to members $1,420, terms n/30. The merchandise sold had a cost of $740. Apr. 10 Accounts Receivable 1,420 Sales Revenue $1,420 Cost of Good Sold 740 Inventory 740 April 12 Purchased golf shoes, sweaters, and other accessories on account from Palmer Sportswear $920, terms 1/10, n/30. Apr. 12 Inventory 920 Accounts Payable $920 April 14 Paid Akers Co. in full. Apr. 14 Accounts Payable 1,600 Cash $1,552 Inventory 48 April 17 Received credit from Palmer Sportswear for merchandise returned $120. Apr. 17 Accounts Payable 120 Inventory $120 April 20 Made sales on account to members $830, terms n/30. The cost of the merchandise sold was $550. Apr. 20 Accounts Receivable 830 Sales Revenue 830 Cost of Good Sold 550 Inventory 550 April 21 Paid Palmer Sportswear in full. Apr. 21 Accounts Payable 800 Cash $792 Inventory 8 April 27 Granted an allowance to members for clothing that did not fit properly $90. Apr. 27 Sales Returns and Allowances 90 Accounts Receivable $90 April 30 Received payments on account from members $1,400. Apr. 30 Cash 1,400 Accounts Receivable 1,400

AB Car follows the revenue recognition principle AB services a car on August 31. The customer picks up the vehicle on September 1 and mails the payment to AB on September 5. AB receives the check in the mail on September 6. When should AB show that the revenue was earned? A. August 31 C. September 5 B. August 1 D. September 6

August 31st

Given the following information on activity in the supplies asset account: Beginning Balance--$2,500, Purchases during year--$3,200, Used during the year--$3,000 The amount which should be shown on the yearend balance sheet as supplies would be: A. $2,500 B. $2,700 C. $3,000 D. $3,200

B. Beginning balance ($2,500) + Purchases ($3,200) = Supplies available ($5,700) minus Supplies used ($3,000) = amount on hand at the end of the year ($2,700). The amount on hand at the end of the year is an asset--an economic resource of the firm--and is therefore, the amount shown on the balance sheet B. $2,700

The cost of goods sold is determined and recorded each time a sale occurs in: A. periodic inventory system only. B. a perpetual inventory system only. C. both a periodic and perpetual inventory system. D. neither a periodic nor perpetual inventory system.

B. a perpetual inventory system only.

Freight costs incurred by a seller on merchandise sold to customers will cause an increase A. in the selling expenses of the buyer. B. in operating expenses for the seller. C. to the cost of goods sold of the seller. D.to a contra-revenue account of the seller.

B. in operating expenses for the seller.

Net income will result if gross profit exceeds A. cost of goods sold. B. operating expenses. C. purchases. D. cost of goods sold plus operating expenses.

B. operating expenses.

Piper Company sells merchandise on account for $1,500 to Morton Company with credit terms of 2/10, n/30. Morton Company returns $500 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Piper Company make upon receipt of the check? A. Cash 1,000 Accounts Receivable 1,000 B. Cash 980 Sales Returns and Allowances 520 Accounts Receivable . 1,500 C. Cash 980 Sales Returns and Allowances 500 Sales Discounts 20 Accounts Receivable 1,500 D. Cash 1,470 Sales Discounts 30 Sales Returns and Allowances 500 Accounts Receivable 1,000

C. Cash 980 Sales Returns and Allowances 500 Sales Discounts 20 Accounts Receivable 1,500 ($1,500-$500) = $1,000 x .02 = $20 Sales discount

Summer Corp. has performed $500 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Summer Corp. make? A. Debit Cash and Credit Unearned Revenue B. Debit Accounts Receivable and Credit Unearned Revenue C. Debit Accounts Receivable and Credit Service Revenue D. Debit Unearned Revenue and Credit Service Revenue

C. Debit Accounts Receivable and Credit Service Revenue

Which of the following accounts is classified as a contra revenue account? A. Sales Revenue B. Cost of Goods Sold C. Sales Returns and Allowances D. Purchase Discounts

C. Sales Returns and Allowances

Entries made by an entity at the end of the accounting period to transfer amounts in temporary accounts to the income summary account are called? -Adjusting entries -Closing entries -Reversing entries -Original entries

Closing entires

Accumulated depreciation is considered to be a (an) Asset account Revenue account Contra asset account Liability account

Contra Assest

When Spring Company fails to adjust a prepaid expense that has partly expired, which was originally recorded by debiting the asset account, the result will usually involve: -An understatement of assets and an understatement of expenses -An overstatement of assets and an overstatement of expenses -An understatement of assets and an overstatement of expenses -An overstatement of assets and an understatement of expenses

D. An overstatement of assets and an understatement of expenses

In a perpetual inventory system, a return of defective merchandise by a purchaser is recorded by crediting: A. Purchases B. Purchase Returns C. Purchase Allowance D. Inventory

D. Inventory

Inventory is shown on the financial statements at cost, except when: A. The inventory is damaged B. The market value of the inventory falls below the cost of the inventory C. The market value of the inventory rises above the cost of the inventory D. (A) and (B) E. (A) and (C)

D. Inventory is shown at the lower of cost or market. If inventory is damaged the inventory should be reduced on the books to the lower of its cost or market.

Which is the correct order of steps in the accounting cycle? A. Journalize and post transactions, journalize and post closing entries, journalize and post adjusting entries. B. Prepare financial statements, prepare adjusting entries, prepare closing entries, and prepare a post-closing trial balance. C. Post transactions, journalize transactions, prepare a trial balance, and prepare financial statements. D. Journalize and post transactions, journalize and post adjusting entries, journalize and post closing entries.

D. Journalize and post transactions, journalize and post adjusting entries, journalize and post closing entries.

Which statement is correct? A. As long as a company consistently uses the cash basis of accounting, generally accepted accounting principles allow its use. B. The cash basis of accounting is objective because no one can be certain of the amount of revenue until the cash is received. C.As long as management is ethical, there are no problems with using the cash basis of accounting. D. The use of the cash basis of accounting violates both the revenue recognition and matching principles.

D. The use of the cash basis of accounting violates both the revenue recognition and matching principles.

The multiple-step income statement for a merchandiser shows each of the following features except: A. gross profit. B. cost of goods sold. C. a sales revenue section. D. investing activities section

D. investing activities section

Unearned revenue is classified as a(n): Asset account Revenue account Contra revenue account Liability account

Liability account

Prepare the journal entries to record the following transactions on Horst Company's books using a perpetual inventory system. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) (a) On March 2, Horst Company sold $913,200 of merchandise to Bernadina Company, terms 2/10, n/30. The cost of the merchandise sold was $522,400.

March 2 Accounts Receivable 913,200 Sales Revenue 913,200 To record the sale of Merchandise March 2 Cost of goods Sold 522,400 Inventory $522,400

(b) On March 6, Bernadina Company returned $118,100 of the merchandise purchased on March 2. The cost of the merchandise returned was $67,410.

March 6 Sales returns and allowances $118,100 Accounts Receivable $118,100 To record the return of Merchandise (b) March 6 Inventory $67,410 Cost of goods Sold $67,410

How do you find net income with accrual basis of accounting?

Revenue Earned Less: Expenses incurred including any depreciation =Net Income

True or false: Accounts receivable is a permanent account.

True

The revenue recognition principle dictates that revenue should be recognized in the accounting records? A. When it is received B. When it is earned C. At the end of the month D. In the period that income taxes are paid

When it is earned

Entries made by an entity to show revenue in the period it was earned and match expenses with this earned revenue are called? -Adjusting entries -Closing entries -Reversing entries -Original entries

adjusting entries

Gross profit equals the difference between a. net income and operating expenses. b. sales revenue and cost of goods sold. c. sales revenue and operating expenses. d. sales revenue and cost of goods sold plus operating expenses.

b. sales revenue and cost of goods sold.

Under the accrual basis of accounting: a. cash must be received before revenue is recognized. b. net income is calculated by matching cash outflows against cash inflows. c. events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. d. the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles.

c. events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received.

The LIFO inventory method assumes that the cost of the latest units purchased are a. the last to be allocated to cost of goods sold. b. the first to be allocated to ending inventory. c. the first to be allocated to cost of goods sold. d. not allocated to cost of goods sold or ending inventory.

c. the first to be allocated to cost of goods sold.

A company purchased inventory as follows: 200 units at $5.00 300 units at $5.50 The average unit cost for inventory is a. $5.00. b. $5.25. c. $5.30. d. $5.50.

c.$5.30 Total Cost ($200 X $5.00) + (300 X $5.50) Total Cost $1,000 + $1,650 = $2,650 Total units (200 + 300) = 500 Average Cost = $2,650/ 500 = $5.30

The general term employed to indicate an expense that has not been paid or revenue that has not been received and has not yet been recognized in the accounts is: a. contra asset. b. prepayment. c. asset. d. accrued.

d. accrued.