ACCOUNTING FINAL
An overstatement of ending inventory in one period results in A) no effect on net income of the next period.
an understatement of net income of the next period.
Which pair of accounts has the same normal balance?
Prepaid Rent and Advertising Expense
Financial information is presented below: Operating expenses $ 36,000 Sales revenue 150,000 Cost of goods sold 105,000 Gross profit would be
$ 45,000
Net credit sales for the month are $750,000. The accounts receivable balance is $160,000. The allowance is calculated as 5% of the receivables balance using the percentage-of-receivables method. If the Allowance for Doubtful Accounts has a credit balance of $5,000 before adjustment, what is the balance after adjustment?
$ 8,000
During 2014 Sedgewick Inc. had sales on account of $264,000, cash sales of $108,000, and collections on account of $168,000. In addition, they collected $2,900 which had been written off as uncollectible in 2013. As a result of these transactions the change in the accounts receivable balance indicates a
$ 96,000 increase.
Carson Company on July 15 sells merchandise on account to Tayler Co. for $2,000, terms 2/10, n/30. On July 20 Tayler Co. returns merchandise worth $800 to Carson Company. On July 24 payment is received from Tayler Co. for the balance due. What is the amount of cash received?
$1,176
Olympus Climbers Company has the following inventory data: July I Beginning inventory 20 units at $19 $ 380 7 Purchases 70 units at $20 1,400 22 Purchases 10 units at $22 220 $2,000 physical count of merchandise inventory on July 30 reveals that there are 32 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for July is
$1,340.
Quiet Phones Company has the following inventory data: July 1 Beginning inventory 20 units at $ 19 $ 380 7 Purchases 70 units at $20 1,400 22 Purchases 10 units at $22 220 $2,000
$1,380.
At the beginning of the year, Uptown Athletic had an inventory of $400,000. During the year, the company purchased goods costing $1,500,000. If Uptown Athletic reported ending inventory of $500,000 and sales of $2,000,000, their cost of goods sold and gross profit rate would be
$1,400,000 and 30%.
A credit sale of $1,900 is made on April 25, terms 2/10, net/30, on which a return of $100 is granted on April 28. What amount is received as payment in full on May 4?
$1,764
Ashley's Accessory Shop started the year with total assets of $140,000 and total liabilities of $80,000. During the year the business recorded $220,000 in revenues, $110,000 in expenses, and dividends of$40,000. The net income reported by Ashley's Accessory Shop for the year was
$110,000
At December 31, 2014 Lowery Company had retained earnings of $2,384,000 after closing entries. During 2014 they issued stock for $98,000, and declared and paid dividends of $34,000. Net income for 2014 was $402,000. The retained earnings balance at the beginning of 2014 was
$2,016,000.
1. Use the following data to determine the total amount of working capital. Koonce Office Supplies Balance Sheet December 31, 2014 Cash $ 130,000 Accounts payable $ 140,000 Accounts receivable 100,000 Salaries and wages payable 20,000 Inventory 110,000 Mortgage payable 160 000 Prepaid insurance 60,000 Total liabilities $320,000 Goodwill 170,000 Land 180,000 Buildings $210,000 Common stock $240,000 Less:Accumulated Retained earnings 500,000 depreciation (40,000) 170,000 Total stockholders' equity $740,000 Trademarks 140 000 Total liabilities and Total assets $1 060 000 stockholders' equity $1 060 000
$240,000
An asset was purchased for $300,000. It had an estimated salvage value of $60,000 and an estimated useful life of 10 years. After 5 years of use, the estimated salvage value is revised to $48,000 but the estimated useful life is unchanged. Assuming straight-line depreciation, depreciation expense in Year 6 would be
$26,400.
1. Marvin Services Corporation had the following accounts and balances: Accounts payable $18,000 Equipment $21,000 Accounts receivable 3,000 Land 21,000 Buildings ? Unearned service revenue 6,000 Cash 9,000 Total stockholders' equity ? If total stockholder's equity was $57,000, what would be the balance of the Buildings Account?
$27,000
Runge Company purchased machinery on January 1 at a list price of $250,000, with credit terms 2/10, n/30. Payment was made within the discount period. Runge paid $12,500 sales tax on the machinery, and paid installation charges of $4,400. Prior to installation, Runge paid $10,000 to pour a concrete slab on which to place the machinery. What is the total cost of the new machinery?
$271,900.
On October 1, 2014, Mann Company places a new asset into service. The cost of the asset is $80,000 with an estimated 5-year life and $20,000 salvage value at the end of its useful life. What is the depreciation expense for 2014 if Mann Company uses the straight-line method of depreciation?
$3,000
Using the allowance method, the uncollectible accounts for the year are estimated to be $40,000. If the balance for the Allowance for Doubtful Accounts is a $9,000·credit before adjustment, what is the balance after adjustment?
$40,000
At October 1, 2014, Metz Industries had an Accounts Payable balance of$70,000. During the month, the company made purchases on account of $50,000 and made payments on account of $80,000. At October 31, 2014, the Accounts Payable balance is
$40,000 credit
A company sells a plant asset that originally cost $240,000 for $80,000 on December 31, 2014. The accumulated depreciation account had a balance of $120,000 after the current year's depreciation of $20,000 had been recorded. The company should recognize a
$40,000 loss on sale.
At December 31, 2014 Mohling Company's inventory records indicated a balance of $602,000. Upon further investigation it was determined that this amount included the following: • $112,000 in inventory purchases made by Mohling shipped from the seller 12/27/14 terms FOB destination, but not due to be received until January 2nd • $74,000 in goods sold by Mohling with terms FOB destination on December 27th. The goods are not expected to reach their destination until January 6th . • $6,000 of goods received on consignment from Dollywood Company What is Mohling's correct ending inventory balance at December 31, 2014?
$484,000
Hoover Company had beginning inventory of$15,000 at March 1, 2014. During the month, the company made purchases of $55,000. The inventory at the end of the month is $17,300. What is cost of goods sold for the month of March?
$52,700
Orange-Aide Company has the following inventory data: July 1 Beginning inventory 20 units at $ 20 $400 7 Purchases 70 units at $21 1,470 22 Purchases 10 units at $22 220 $2,090
$523
1. Elston Company compiled the following financial information as of December 31, 2014: Service revenue $700,000 Common stock 150,000 Equipment 200,000 Operating expenses 625,000 Cash 175,000 Dividends 50,000 Supplies 25,000 Accounts payable 100,000 Accounts receivable 75,000 Retained earnings, 1/1/14 375,000 Elston's stockholders' equity on December 31, 2014 is
$550,000
Carryable CDs has the following inventory data: Nov. 1 Inventory 30 units@ $4.00 each 8 Purchase 120 units@ $4.30 each 17 Purchase 60 units @ $4.20 each 25 Purchase 90 units@ $4.40 each
$863
Anderson Inc. sells $900 of merchandise on account to Baltic Company with credit terms of2/10, n/30. If Baltic Company remits a check taking advantage of the discount offered, what is the amount of Baltic Company's check?
$882
The interest on a $6,000, 6%, 90-day note receivable is
$90.
Burke Company purchases land for $90,000 cash. Burke assumes $2,500 in property taxes due on the land. The title and attorney fees totaled $1,000. Burke has the land graded for $2,200. They paid $10,000 for paving of a parking lot. What amount does Burke record as the cost for the land?
$95,700.
1. Use the following data to calculate the current ratio. Eddy Auto Supplies Balance Sheet December 31, 2014 Cash $ 84,000 Accounts payable $ 110,000 Accounts receivable 80,000 Salaries and wages payable 20,000 Inventory 140,000 Mortgage payable 180.000 Prepaid insurance 60,000 Total liabilities $310,000 Goodwill 170,000 Land 190,000 Buildings $226,000 Common stock $240,000 Less: Accumulated Retained earnings 500 000 depreciation (40,000) 186,000 Total stockholders' equity $740,000 Trademarks 140 000 Total liabilities and Total assets $] 050 000 stockholders' equity $1 050 000
2.80 : 1
A company shows the following balances: Sales Revenue $1,000,000 Sales Returns and Allowances 175,000 Sales Discounts 25,000 Cost of Goods Sold 560,000 What is the gross profit rate?
30%
Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $45,000. If the balance of the Allowance for Doubtful Accounts is $11,000 debit before adjustment what is the balance after adjustment?
45,000
Which of the following errors, each considered individually, would cause the trial balance to be out of balance?
A payment of $148 to a creditor was posted as a debit to Accounts Payable and a debit of $148 to Cash.
Otto's Tune-Up Shop follows the revenue recognition principle. Otto services a car on August 31. The customer picks up the vehicle on September 1 and mails the payment to Otto on September 5. Otto receives the check in the mail on September 6. When should Otto show that the revenue was recognized?
August 31
Ending retained earnings for a period is equal to
Beginning Retained earnings + Net income - Dividends
Which sales accounts normally have a debit balance?
Both Sales Discounts and Sales Returns and Allowances have debit balances
If a company pays dividends of$10,000,
Both retained earnings and stockholders' equity will be reduced by $10,000.
Nance Co. holds Gant Inc.'s $25,000, 120 day, 9% note. The entry made by Nance Co. when the note is collected, assuming no interest has previously been accrued is:
Cash 25,750 Note Receivable 25,000 Interest Revenue 750
An accountant has debited an asset account for $1,000 and credited a liability account for $500. What can be done to complete the recording of the transaction?
Credit a different asset account for $500.
Current Ratio Formula
Current Assets/ Current Liabilities
Mary Richardo 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 Mary make?
Debit Accounts Receivable and credit Service Revenue
On April 1, 2013, Propel Corporation paid $48,000 cash for equipment that will be used in business operations. The equipment will be used for four years. Propel records depreciation expense of $48,000 for the calendar year ending December 31, 2013. Which accounting principle has been violated?
Expense recognition principle
20. A company using the cash basis of accounting reports net income for 2014 of$45,460. If the company had used the accrual basis of accounting it would have reported the following year-end balances: 2014 2013 Accounts receivable $3,850 $5,100 Supplies 1,740 1,950 Salaries and Wages payable 3,600 2,250 Other unpaid amounts 2,400 2,100 Instructions: Determine the company's net income under the accrual basis of accounting. Show your calculations. Use the column headings shown below. Explanation Amount
Explanation Amount Cash basis net income $45,460 The decrease in accounts receivable would be included in cash basis net income, but not accrual basis net income (1,250) The decrease in supplies would not be included in cash basis net income ( 210) The increase in wages payable would be deducted in accrual basis net income (1,350) The increase in other unpaid amounts would be deducted in accrual basis net income ( 300) Accrual basis net income $42 350
Which inventory method generally results in costs allocated to ending inventory that will approximate their current cost?
FIFO
Which of the following items will increase inventoriable costs for the buyer of goods?
Freight charges paid by the purchaser
Which of the following items has no effect on retained earnings?
Land purchase
Net income results when
Revenues > Expenses.
Which of the following would not be classified as a contra account?
Sales Revenue
Which account will have a zero balance after closing entries have been journalized and posted?
Service revenue
Which statement is incorrect?
Stockholders' Equity is an account that is included in the chart of accounts
Which type of accounts will not appear in the post-closing trial balance?
Temporary accounts
When using a perpetual inventory system, why are discounts credited to Inventory?
The discounts reduce the cost of the inventory
Which statement concerning lower of cost or market (LCM) is incorrect?
Under the LCM basis, market does not apply because assets are always recorded and maintained at cost.
An error in the physical count of goods on hand at the end of a period resulted in a $10,000 overstatement of the ending inventory. The effect of this error in the current period is Cost of Goods Sold Net Income
Understated Overstated
When expenses exceed revenues, which of the following is true?
a net loss results
The balance in the Accumulated Depreciation account represents the
amount charged to expense since the acquisition of the plant asset.
Under the allowance method, writing off an uncollectible account
affects only balance sheet accounts.
Generally Accepted Accounting Principles (GAAP)
are accounting rules that are recognized as a general guide for financial reporting
Resources owned by a business are referred to as
assets
If total liabilities decreased by $4,000, then
assets must have decreased by $4,000, or stockholders' equity must have increased by $4,000
If services are rendered for cash, then
assets will increase
The inventory turnover is calculated by dividing cost of goods sold by
average inventory
The collection of an account that had been previously written off under the allowance method of accounting for uncollectibles
does not affect income in the period it is collected
The primary difference between prepaid and accrued expenses is that prepaid expenses have:
been recorded and accrued expenses have not
The Stockholders' equity section of the balance sheet should list:
common stock and retained earnings
The account Allowance for Doubtful Accounts is classified as a(n)
contra account to Accounts Receivable.
The book value of a plant asset is the difference between the
cost of the asset and the accumulated depreciation to date.
When applying the lower of cost or market rule to inventory valuation, market generally means
current replacement cost.
Boyce Company purchased office supplies costing $5,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,800 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be:
debit Supplies Expense, $3,200; credit Supplies, $3,200.
When a company has performed a service but has not yet received payment, it
debits accounts receivable and credits service revenue.
Debits
increase assets and decrease liabilities
The purchase of an asset on credit
increases assets and liabilities
A debit balance in the Allowance for Doubtful Accounts
indicates that actual bad debt write-offs have exceeded previous provisions for bad debts
A revenue account
is increased with a credit.
The right side of an account
is the credit side
If the retained earnings account decreases from the beginning of the year to the end of the year, then
net income is less than dividends
Net income will result if gross profit exceeds
operating expenses
Equipment is classified on the balance sheet as
property, plant, and equipment.
The normal balance of any account is the
side which increases that account
If goods in transit are shipped FOB destination
the seller has legal title to the goods until they are delivered.
Expenses are recognized when
they contribute to the production of revenue
why are expenses increased with a debit?
they decrease stockholder's equity thus they increase with a debit
When collection is made on Accounts Receivable
total assets will remain the same
If a business pays rent in advance and debits a Prepaid Rent account, the company receiving the rent payment will credit:
unearned rent revenue