Accounting 300 exam 1 (part two)

On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a truck. The truck was expected to have a four year useful life and an $8,000 salvage value. If Marino uses the straight-line method, the amount of depreciation expense recognized on the Year 2 income statement is

$10,000

Walter Company's multistep income statement shows cost of goods sold of $60,000, a gross margin of $42,000, operating income of $12,000 and a $20,000 loss on the sale of land. Based on this information the sales revenue amounted to $72,000 $60,000 $122,000 $102,000

$102,000

Rushmore Company started the year with $5,000 in accounts payable. During the year, the company provided services on account for $45,000. Rushmore incurred $36,000 expenses on account during the year, and by year end the balance in accounts payable was $24,000. Assuming that these are the only accounting events that affected Rushmore, how much of the accounts payable did the company pay off during the year?

$17,000

Nest Company started Year 2 with a beginning balance of $7,000 in accounts receivable. During the year, revenue on account amounted to $13,000. The company incurred $3,000 of expenses on account and paid dividends of $500. If the company had an ending balance in accounts receivable of $2,000, how much cash was collected from customers?

$18,000

The amount of revenue shown on the income statement may differ from the amount of cash inflow from operating activities shown on the statement of cash flows. T/F

True

McDonald's will recognize a gain if it generates an amount of revenue that is higher than its operating expenses. T/F

False

The amount of net sales is determined by which of the following formulas? Gross sales + Sales Returns and Allowances - Sales discounts Gross sales + Sales Returns and Allowances + Sales discounts Gross sales - Sales Returns and Allowances - Sales discounts Gross sales - Sales Returns and Allowances + Sales discounts

Gross sales - Sales Returns and Allowances - Sales discounts

Jay Company started Year 2 with a beginning balance of $10,000 in accounts receivable. During the year, revenue on account amounted to $25,000. Cash collections of accounts receivable amounted to $5,000. Expenses for the period were $2,100. The company paid dividends of $450. Based on this information alone, what is the ending balance in accounts receivable for Year 2?

$30,000

On October 1 of Year 1 Zeta Company collected $1,200 cash for services to be provided for one year beginning immediately. The company's fiscal closing date is December 31. Based on this information, the amount of revenue appearing on the Year 1 income statement would be

$300

Keisha Dress Shops experienced the following events during its third accounting period. Sold merchandise that cost $92,000 for $140,000 cash. Paid $30,000 of operating expenses. Paid a $4,000 cash dividend. Based on this information, the amount of the gross margin is $48,000 $18,000 $14,000 None of the above is correct

$48,000

On August 1 of Year 1 Presco Enterprises paid $1,200 cash for an insurance policy that would provide protection for a one year term. The company's fiscal closing date is December 31. Based on this information, the amount of insurance expense appearing on the Year 1 income statement would be

$500

Buckley Company started in Year 1 by issuing stock for $17,000 cash. During Year 1, Buckley earned $12,500 of revenue on account. The company collected $6,000 cash from accounts receivable and paid $4,000 cash for operating expenses. Based on this information alone, the balance in accounts receivable as of December 31, Year 1 is:

$6,500

Knoll Company started Year 2 with a $500 balance in its Cash account, a $500 balance in its Supplies account and a $1,000 balance in its common stock account. During Year 2 the company experienced the following events. Paid $400 cash to purchase supplies Physical count revealed $100 of supplies on hand at the end of Year 2 Based on this information the amount of supplies expense reported on the Year 2 income statement is

$800.

The following items were drawn from a company's accounting records: 1. Accounts receivable 2. Accounts payable 3. Cash paid to purchase land 4. Supplies 5. Supplies expense 6. Cash collected for service to be provided in the future 7. Unearned revenue 8. Prepaid rent 9. Earned Revenue 10. Accrued salaries expense 11. Common stock 12. Dividends 13. Cash paid for prepaid rent 14. Retained earnings

1, 2, 4, 7, 8, 11, and 14

f a company recognizes $5,000 of accrued salary expense on December 31, Year 1, -on January 1, Year 2 there will be a zero balance in the Accrued Salaries Expense account. -on January 1, Year 2 there will be a $5,000 balance in the Accrued Salaries Payable account. -the December 31, Year 1 expense recognition will not affect the cash account. -All of the answer are correct.

All of the answer are correct.

Which of the following statements is true? To determine the book value of a long-term asset, the balance in the accumulated depreciation account must be subtracted from cost of the asset. Accumulated depreciation is a contra asset account. The amount of depreciation expense recognized each year is added to the beginning balance of accumulated depreciation account to determine the ending balance of the account. All of the statements are true.

All of the statements are true.

Garcia Company recognized revenue on account. The recognition will affect which of the following financial statements?

Income statement and the balance sheet

On May 1 of Year 1 Matthew Company paid $2,400 cash for an insurance policy that would protect the company for one year. The company's fiscal closing date is December 31. Based on this information, the amount of insurance expense and the cash flow from operating activities shown on the Year 1 financial statements would be

Insurance Expense Cash flow $1,600 ($2,400)

Which of the following statements is false? Prepaid insurance indicates that a company has already paid cash for insurance coverage that protects the company for some future time period. Prepaid insurance is shown on the income statement. Prepaid insurance is a deferred expense. Prepaid insurance represents a future economic benefit.

Prepaid insurance is shown on the income statement.

Guadalupe, Inc. provided $5,000 of services in Year 1 but did not collect cash from its customers until Year 2. Select the correct answer from the following options assuming Guadalupe used accrual accounting. -The Company will recognize $5,000 of revenue in Year 1 and $5,000 of cash flow from operations in Year 2. -The Company will recognize zero of revenue in Year 1 and $5,000 of cash flow from operations in Year 2. -The Company will recognize $5,000 of cash flow from operations in Year 1 and $5,000 of revenue in Year 2. -The Company will recognize $5,000 of revenue and $5,000 of cash flow from operations in Year 1.

The Company will recognize $5,000 of revenue in Year 1 and $5,000 of cash flow from operations in Year 2.

A company using accrual accounting may report revenue on the income statement even if it does not collect cash. T/F

True

Accrued interest expense will appear on the income statement but not on the statement of cash flows. T/F

True

On June 1 of Year 1 Zoe Company collected $1,800 cash for medical services to be provided for one year beginning immediately. The company's fiscal closing date is December 31. Based on this information the amount of unearned revenue and service revenue shown on the Year 1 financial statements would be

Unearned Revenue] [Service Revenue $750 $1,050

During Year 1, Pang Enterprises experienced the following events. Earned $4,000 of revenue on account. Collected $3,500 cash from accounts receivable. The remainder of the receivable was collected in Year 2. Based on this information, the amount of accounts receivable, net income, and cash flow from operating activities appearing on the Year 2 financial statements is

[Accts. Rec].[Net Inc.][Cash flow from Op. Act.] Zero Zero $500

GreyCo and Sons earns $6,900 of revenue on account in Year 1. Cash collections of receivables amount to $6,300 in Year 1 with the remainder being collected in Year 2. Based on this information alone the company's financial statements would show

a balance of $600 in accounts receivable at the beginning Year 2. As stated in the problem, cash collected in Year 1 is $6,300. The remaining $600 ($6,900 - $6,300) is collected in Year 2. The balance of accounts receivable at the end of Year 1 would be $600 ($6,900 total account receivable generated from revenue minus the $6,300 cash collected). The Year 2 beginning balance is the same as the Year 1 ending balance as determined previously as $600.

AmRon Company sold land that had cost $25,000 for $26,500. Based on this information, the company's year-end financial statements would show a cash inflow from operating activities of $1,500 on the statement of cash flows. a gain of $26,500 on the income statement. a cash inflow from investing activities of $26,500 on the statement of cash flows. a balance of $25,000 in the cash account on the balance sheet.

a cash inflow from investing activities of $26,500 on the statement of cash flows.

Inventory is an asset account that appears on the balance sheet. an expense account that appears on the income statement. a cash item that appears on the statement of cash flows. not an account. Instead, it is an information item like gross margin or net income.

an asset account that appears on the balance sheet.

When a company incurs accrued expenses -an asset account decreases. -stockholders' equity increases. -assets are not affected. -all of the answers are correct.

assets are not affected.

When a company purchases supplies on account expenses increase. total assets decrease. cash flow from investing activities decreases. liabilities increase.

liabilities increase.

The gross margin appears on a single-step income statement. multistep income statement. single-step statement of cash flows. multistep statement of cash flows.

multistep income statement.

Stannous Company earns $2,000 of revenue on account in Year 1. Cash collections of receivables amount to $1,800 in Year 1 with the remainder being collected in Year 2. Based on accrual accounting the company's financial statements would show net income of $1,800 in Year 2. net income of $2,000 in Year 2. net income of $1,800 in Year 1. net income of $2,000 in Year 1.

net income of $2,000 in Year 1.

Smith Company purchased inventory for $5,000 on account. Freight cost was $600 paid in cash. The freight terms were FOB destination. The inventory was sold to customers for $8,000. Freight cost was $600 paid in cash. The freight terms were FOB shipping point. Based on this information, gross margin would be $2,400. net income would be $3,000. net income would be $1,800. None of the answers are correct.

net income would be $3,000.

When a merchandising company sells inventory it will recognize only an expense. recognize only revenue. recognize revenue and expense. not recognize revenue or expense.

recognize revenue and expense.

Zack's, Inc. sold land that cost $85,000 for $70,000 cash. As a result of this event total assets increased. total assets were not affected. total assets and liabilities increased. total assets decreased.

total assets decreased.

On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a truck. The truck was expected to have a four-year useful life and an $8,000 salvage value. If Marino uses the straight-line method, the amount of accumulated depreciation shown on the Year 2 balance sheet is

$20,000

Clayton Company borrowed $6,000 from the State Bank on April 1, Year 1. The one-year note carried a 6% rate of interest. The amount of interest expense that Clayton would report in Year 1 and Year 2, respectively would be $360, and $0. $0, and $360. $270, and $90. $270, and $0.

$270, and $90.

On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a truck. The truck was expected to have a four-year useful life and an $8,000 salvage value. If Marino uses the straight-line method, the amount of book value shown on the Year 2 balance sheet is

$28,000

Sheldon Company began Year 2 with $1,500 in accounts payable. During the year, the company incurred utility expense of $3,500 on account. The company paid $2,000 on accounts payable by year end. The company also paid a cash dividend of $500. At the end of Year 2, what is the balance in Sheldon's accounts payable?

$3,000

On November 1 of Year 1 Falloch, Inc. paid $2,400 cash for a contract allowing the company to use office space for one year. The company's fiscal closing date is December 31. Based on this information, the amount of cash flow from operating activities appearing on the Year 1 statement of cash flows would be

($2,400).

Escrow Company's multistep income statement shows cost of goods sold of $60,000, a gross margin of $42,000, operating income of $12,000 and a $20,000 loss on the sale of land. Based on this information, the net income or (net loss) amounted to $12,000. ($20,000). ($8,000). None of the answers is correct.

($8,000).

The following items were drawn from a company's accounting records: 1. Accounts receivable 2. Accounts payable 3. Cash paid to purchase land 4. Supplies 5. Supplies expense 6. Cash collected for service to be provided in the future 7. Unearned revenue 8. Prepaid rent 9. Earned Revenue 10. Accrued salaries expense 11. Common stock 12. Dividends 13. Cash paid for prepaid rent 14. Retained earnings Which of the items listed above appear on the income statement?

5, 9, and 10

Lawyers Inc. accepted a $12,000 retainer for which the company agreed to provide services in the future. Recognizing this event would defer the recognition of revenue. cause the company's assets to increase. cause the company's liabilities to increase. All of the answers are correct.

All of the answers are correct.

Which of the following events experienced by a department store would be presented in the operating section of a multistep income statement? Inventory sold for less than its cost Equipment sold for more than its cost Land sold for less than its cost All of the above are reported within operating income.

Inventory sold for less than its cost

When a merchandising company pays cash to purchase inventory the amount of total assets increases. the amount of expenses increases. the amount of total assets decreases. None of the answers is correct.

None of the answers is correct.

On June 1 of Year 1 Doe Company paid $1,800 cash for an insurance policy that would protect the company for one year. The company's fiscal closing date is December 31. Based on this information alone, the amount of prepaid insurance and insurance expense shown on the Year 2 financial statements would be

Prepaid Insurance Insurance Expense zero $750

On May 1 of Year 1 Matthew Company collected $2,400 cash for services to be provided for one year beginning immediately. The company's fiscal closing date is December 31. Based on this information, the amount of service revenue and the cash flow from operating activities shown on the Year 1 financial statements would be

Service Revenue Cash flow $1,600 $2,400

A cost may be recorded as an expense or as an asset purchase. T/F

True

When a company earns revenue on account the asset account, accounts receivable, increases. a revenue account increases. liabilities are not affected. all of the answers are correct.

all of the answers are correct.

Paying cash to purchase inventory is an asset source transaction. an asset use transaction. an asset exchange transaction. a claims exchange transaction.

an asset exchange transaction.

Accounts receivable will appear on which of the following financial statements?

balance sheet

The accounts payable account appears on

balance sheet

On December 31, Year 1 Adam Company incurred $3,000 of accrued salary expense. The Year 2 recognition of the cash payment for these expenses decreases the amount of liabilities shown on the Year 2 balance sheet. increases the amount of salary expense recognized in Year 2. decreases the amount of salary expense recognized in Year 2. increases the amount of liabilities shown on the Year 2 balance sheet.

decreases the amount of liabilities shown on the Year 2 balance sheet.

A deferral exists when a company pays cash after recognizing the associated expense. exists when a company pays cash before recognizing the associated expense. exists when a company pays cash at the time the associated expense is recognized.

exists when a company pays cash before recognizing the associated expense.

A deferral exists when a company receives cash after recognizing the associated revenue. exists when a company receives cash before recognizing the associated revenue. exists when a company receives cash at the time the associated revenue is recognized.

exists when a company receives cash before recognizing the associated revenue.

Smith Company sold inventory that cost $5,000 for $9,000 cash. Freight cost was $600 paid in cash. The freight terms were FOB shipping point. Based on this information, gross margin would be $4,000. net income would be $3,400. gross margin would be $3,400. None of the answers are correct.

gross margin would be $4,000.

The following income statements were drawn from the annual report of The Western Sales Company. Year 2 Year 1 Sales 40,000 40,000 Cost of Goods Sold (25,000 ) (25,000 ) Gross Margin 15,000 15,000 Operating Expenses (7,000 ) (9,000 ) Operating Income 8,000 6,000 Gain on the sale of land 0 5,000 Net Income 8,000 11,000 If the trends continue, investors can expect the company's net income for Year 3 to increase. decrease. stay the same. move up and down.

increase.

When a company collects cash from accounts receivable, Possible Answer stockholders' equity increases. total assets are not affected. liabilities decrease.

stockholders' equity increases.

If a company recognizes accrued salary expense -the company's employees have completed work but have not been paid. -the employees have been paid but have not completed their work. -the employees have worked and have been paid for the work they completed. -will work in the future and will be paid in the future.

the company's employees have completed work but have not been paid.

When a company collects cash from accounts receivable, Possible Answer stockholders' equity increases. total assets are not affected. liabilities decrease.

total assets are not affected.

On August 1 of Year 1 Accounting Associates collected $1,200 cash for consulting services to be provided for one year beginning immediately. The company's fiscal closing date is December 31. Based on this information, the amount of unearned revenue appearing on the December 31, Year 2 balance sheet would be

zero