ACCT 2010 Final Exam Review (Guragai)
A bond was issued at a discount. The journal entry to record payment of this bond payable at maturity will include a:
debit to Bonds Payable and a credit to Cash.
Fenway Corporation issued $16,000, 10-year, 8% bond dated January 1, at 103. The journal entry to record the issuance of the bond will include a:
debit to Cash for $16,480.
If a bank statement includes an EFT receipt of $200 for interest, the journal entry to record this reconciling item should include a:
debit to Cash for $200 and a credit to Interest Revenue for $200.
The Houston Mavericks basketball team receives $5,000 for season tickets on August 1. By December 31, $3,000 of the revenue has been earned. The adjusting entry to be made on December 31 includes a:
debit to Unearned Revenue of $3,000.
Morgan Oaks Company replaced the windshield and painted several of its vehicles during the year. These costs should be:
debited to Repair Expense.
The date on which a cash dividend becomes a legal obligation is the:
declaration date.
When preparing a bank reconciliation:
deposits in transit are added to the bank balance.
A lump-sum purchase of multiple, long-term plant assets required the company to:
divide the total cost among the various assets according to their market values.
The accounting principle that requires a company to record warranty expense in the same period that it records sales revenue is the:
expense recognition principle.
Costs that do not extend a plant asset's capacity or its useful life, but merely maintain the asset or restore it to working order are recorded as:
expenses.
The inventory method used by a company affects:
the income taxes paid, the ending inventory on the balance sheet, and net income on the income statement.
When inventory is shipped from the seller to the buyer with shipping terms of FOB destination:
the seller has title to the goods while they are in transit.
Treating a capital expenditure as an immediate expense:
understates assets and stockholders' equity in the year of error.
All of the following are reported as current liabilities EXCEPT:
unearned revenues for services to be provided in 16 months.
Income tax payable appears on the:
balance sheet.
The _______ basis of accounting records revenue ONLY when cash is received.
cash
Highly liquid short-term investments that can be immediately converted into cash are called:
cash equivalents.
Two accounts that appear on the financial statements of a merchandising company but are not needed by a service company are:
cost of goods sold and inventory.
If ending inventory is understated for Year 1, then in Year 2:
cost of goods sold will be understated and gross profit will be overstated.
On January 1, Hanley Corporation issued $1,700,000, 10-year, 7% bonds at 101. The journal entry to record this transaction would include a:
credit Premium on Bonds Payable $17,000.
Eastwich Corporation has pretax accounting income of $5,900,000 and taxable income of $5,820,000. The company's income tax rate is 20%. The journal entry to record the income tax includes a:
credit to Deferred Tax Liability of $16,000.
A bank statement included a NSF check from customer Kim Fields for $2,100. The journal entry to record this reconciling item should:
debit Accounts Receivable and credit Cash for $2,100.
The journal entry to record depreciation expense is:
debit Depreciation expense, credit Accumulated Depreciation.
Wisconsin Bank lends Local Furniture Company $140,000 on November 1. Local Furniture Company signs a $140,000, 3%, 4-month note. The fiscal year end of Local Furniture Company is December 31. The journal entry made by Local Furniture Company on December 31 is (Hint: This question is asking the interest accrual journal entry):
debit Interest Expense and credit Interest Payable for $700.
The journal entry to record accrued interest on a note receivable at year end is:
debit Interest Receivable and credit Interest Revenue.
Kunze Corporation has $1 par value Common Stock with 100,000 shares authorized and 25,000 shares issued. The journal entry to record Kunze's purchase of 5,000 shares of common stock at $4 per share would be:
debit Treasury Stock for $20,000 and credit Cash for $20,000.
Comprehensive income is:
not used to determine net income or earnings per share.
The following account balances were extracted from the accounting records of Thomas Corporation at the ends of the year: ------------------------------------------------------------------ Accounts Receivable $1,104,000 Allowance for Uncollectible Accounts (Credit) $39,000 Uncollectible-Account Expense $63,000 ------------------------------------------------------------------ What is the net realizable value of the accounts receivable?
$1,065,000
Three key duties that must always be separated under a good system of internal controls are:
asset handling, record keeping, and transaction approval.
On January 1, 2017, the Bonds Payable account has a balance of $690,000. On December 31, 2017, the Bonds Payable account has a balance of $810,000. During 2017, one bonds of $10,000 was retired. No discounts or premiums were amortized in 2017. What amount of new bonds were issued in 2017?
$130,000
On January 4, 2017, Mary's Cafe acquired equipment for $700,000. The estimated life of the equipment is 8 years or 60,000 hours. The estimated residual value is $60,000. What is the balance in the Accumulated Depreciation account at December 31, 2018 if the straight-line method is used?
$160,000
Wendell Corporation reported net income for the current year of $800,000. Wendell had 6,000 shares of $90 par value, 12% preferred stock outstanding and 42,000 shares of $1 par value common stock outstanding for the entire year. Earnings per share is:
$17.50
Thelen's inventory records show the following data at January 31: ------------------------------------------------------------------ Beginning inventory Jan. 1 120 units at $6 per unit Jan. 10 purchase 320 units at $11 per unit Jan. 22 purchase 110 units at $12 per unit ------------------------------------------------------------------ At January 31, 240 units are still on hand. What is the cost of the ending inventory at January 31 if Thelen uses the LIFO method?
$2,040
Tomasino's inventory records show the following data at January 31: ------------------------------------------------------------------ Beginning inventory Jan. 1 100 units at $9 per unit Jan. 10 purchase 300 units at $12 per unit Jan. 22 purchase 130 units at $13 per unit ------------------------------------------------------------------ At January 31, 230 units are still on hand. What is the cost of the ending inventory at January 31 if Tomasino uses the FIFO method?
$2,890
Wendell Corporation reported net income for the current year of $830,000. Wendell had 3,000 shares of $130 par value, 12% preferred stock outstanding and 39,000 shares of $1 par value common stock outstanding for the entire year. Earnings per share is:
$20.08
The following data are for Jessee's Candy Store for January: ------------------------------------------------------------------ Beginning inventory $205,000 Net sales revenue $440,000 Net purchases $585,000 Normal gross profit rate 40% ------------------------------------------------------------------ What is the company's estimated cost of goods sold for the month?
$264,000
Lennon Company signed a 12-month, $59,000, 9% note on June 1, 2017. The amount of interest to be accrued on December 31, 2017 is:
$3,098.
The balance in Accounts Receivable was $700,000 at the beginning of the year and $780,000 at the end of the year. Credit sales for the year totaled $4,110,000. During the year, $430,000 in customer accounts were written off. How much cash was collected from customers during the period?
$3,600,000
A company reports the following balances: ------------------------------------------------------------------ 12/31/2016 12/31/2017 Common Stock $14,000 $162,000 Pain-in Capital in Excess of Par 97,000 109,000 Retained Earnings 64,000 79,000 ------------------------------------------------------------------ During 2017, dividends of $17,000 were declared and paid. What is net income for 2017?
$32,000
Nichols, Inc. has 8,000 shares of 4%, $100 par value, cumulative preferred stock and 75,000 shares of $1 par value common stock outstanding at December 31, 2017. What is the annual dividend that will be paid to the preferred stockholders?
$32,000
If the market interest rate is greater than than the stated interest rate on bonds, bonds will sell:
at a discount.
Lewandowski Company reports the following information at the fiscal year end of December 31, 2017: ------------------------------------------------------------------ Common Stock, $0.10 par value per share $98 million Paid-in Capital in Excess of Par-Common 400 million Retained Earnings 900 million Total Stockholders' Equity $1398 million ------------------------------------------------------------------ What is the total paid-in capital for this company at December 31, 2017?
$498 million
On January 1, 2017, Always Corporation issued $2,600,000, 5-year, 11% bonds for $2,540,000. Interest is paid semiannually on January 1 and July 1. Always Corporation uses the straight-line method of amortization. The company's fiscal year ends on December 31. The amount of discount amortized on July 1, 2017 is:
$6,000.
Jumpin Corporation uses the percent-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to $2,020,000, and management estimates 3% will be uncollectible. The Allowance for Uncollectible Accounts prior to adjustment has a debit balance of $1,600. The amount of Uncollectible-Account Expense reported on the income statement will be:
$60,600.
Given the following data, calculate the cost of ending inventory using the average cost method. ------------------------------------------------------------------ Date Item Unit 1/1 Beginning inventory 30 units at $10 per unit 3/5 Purchase of inventory 40 units at $20 per unit 5/30 Purchase of inventory 15 units at $22 per unit 12/31 Ending inventory 40 units ------------------------------------------------------------------
$672.94
On January 1, 2017, the Notes Receivable account has a balance of $12,000. On December 31, 2017, the Notes Receivable account has a balance of $80,000. No collections on notes receivable occurred in 2017. What amount of long-term notes were made in 2017?
$68,000
At January 1, 2017, the Estimated Warranty Payable is $1,100. During 2017, the company recorded Warranty Expense of $19,500. During 2017, the company replaced defective products in accordance with product warranties at a cost of $12,000. What is the Estimated Warranty Payable at December 31, 2017?
$8,600
A year-end review of Accounts Receivable and estimated uncollectible percentages revealed the following: ------------------------------------------------------------------ Days Outstanding Accounts Receivable Est. % Uncollectible 1-30 days $62,000 2% 31-60 days $40,000 4% 61-90 days $23,000 11% Over 90 days $9,000 50% ------------------------------------------------------------------ Before the year-end adjustment, the credit balance in Allowance for Uncollectible Accounts was $1,000. Under the aging-of-receivables method, the Uncollectible-Account Expense at year-end is:
$8,870.
In 2017, Chen Corporation purchased treasury stock with a cost of $46,000. During the year, the company declared and paid dividends of $14,000 and issued bonds payable for $900,000. Net cash provided by financing activities for 2017 is:
$840,000.
On January 4, 2017, Margaret's Cafe acquired equipment for $265,000. The estimated life of the equipment is 4 ears or 42,500 hours. The estimated residual value is $10,000. What is the depreciation for 2017, if Margaret's Cafe uses the asset 14,300 hours and uses the units-of-production method of depreciation?
$85,800
Leno Company sells goods to the Fallon Company for $10,000. It offers credit terms of 2/10, n/30. If Fallon Company pays the invoice within the discount period, Leno Company will record a debit to Cash in the amount of:
$9,800.
A bond with a face value of $90,000 and a quoted price of 106 has a selling price of:
$95,400.
Which accounts are increased by debits?
Accounts Receivable and Utilities Expense.
The net realizable value of accounts receivable is the difference between gross accounts receivable and:
Allowance for Uncollectible Accounts.
Company A received cash and issued stock to a new stockholder. In recording this transaction:
Cash would be debited.
If a corporation issues 2,000 shares of $1 par value common stock for $8,000, the journal entry would include a credit to:
Common Stock for $2,000.
Equipment with a historical cost of $70,000 and Accumulated Depreciation of $70,000 is junked. Which journal entry is necessary?
Debited Accumulated Depreciation - Equipment for $70,000 and credit Equipment for $70,000.
Following Generally Accepted Accounting Principles, which method of estimating uncollectible accounts is NOT acceptable?
Direct write-off method
Which one of the following is NOT a stockholder's right of ownership in a corporation?
The right to decide if a dividend should be distributed.
Aisha Company paid $1,500 cash to replace a wheel on equipment sold under a two-year warranty in the prior year. The entry to record the payment will debit:
Estimated Warranty Payable and Credit Cash.
Santa Barbara Company, a U.S. company, purchased merchandise on account from a company in England. The price was 1,300 British pounds. At the time of the purchase, the exchange rate for a British pound was $1.54. At the time Santa Barbara Company paid for the merchandise, the exchange rate for a British pound was $1.58. What is the amount of the gain or loss recorded by the Santa Barbara Company upon payment?
Foreign currency transaction loss $52.
The book side of a bank reconciliation includes:
NSF checks, bank collections of note receivable, and interest earned on the checking account.
Miller Corporation issued 12,000 shares of its $5 par value common stock in payment for attorney services billed at $180,000. Miller Corporation's stock has been actively trading at $15 per share. The journal entry for this transaction would include a credit to:
Paid-in Capital in Excess of Par-Common for $120,000.
Miller Corporation issued 8,000 shares of its $5 par value common stock in payment for attorney services billed at $88,000. Miller Corporation's stock has been actively trading at $11 per share. The journal entry for this transaction would include a credit to:
Paid-in Capital in Excess of Par-Common for $48,000.
If a corporation declares a $100,000 cash dividend, the account to be debited on the date of declaration is:
Retained Earnings or Dividends.
The journal entry to record salaries earned by employees will debit:
Salary Expense for gross pay, credit FICA Tax Payable, credit Employee Income Tax Payable, and credit Salary Payable for net pay.
The following accounts and balances are taken from Jenny Company's adjusted trail balance: ------------------------------------------------------------------ Accounts Payable $10,000 Accounts Receivable 3,000 Accumulated Depreciation 1,400 Depreciation Expense 1,500 Dividends 2,400 Insurance Expense 2,300 Interest Revenue 1,240 Prepaid Insurance 2,320 Retained Earnings 10,500 Salary Expense 24,100 Service Revenue 37,800 ------------------------------------------------------------------ In the closing process, which accounts are debited?
Service Revenue and Interest Revenue
Which of the following criteria would cause a lease to be recorded as an operating lease?
The lease term is less than 75% of the useful life of the leased property.
Following U.S. Generally Accepted Accounting Principles, how is a change in accounting estimate handled?
The new estimate must be used in the current and future years only.
A company has 300,000 shares issued and outstanding of $1 par common stock. After a 2-for-1 stock split, which of the following statements is FALSE?
The number of shares issued is 150,000.
When a business receives cash from customers before earning the revenue, the _________ account is credited.
Unearned Revenue.
Franco Company sold office furniture for $2,400 cash. The furniture cost $70,000 and had accumulated depreciation through the date of sale totaling $32,000. The company will recognize:
a loss of $35,600.
The basic form of capital stock is:
a share of common stock.
The bookkeeper recorded a deposit of $700 as $70. On the bank reconciliation, this will be a(n):
addition of $630 to the balance per books.
In 2017, Gary Kraen Company purchases $100,000 of equipment with cash. This purchase would be reported on Gary Kraen Company's 2017 statement of cash flows as:
an investing activity.
Cash received from the issuance of bonds would be reported on a statement of cash flows under:
financing activities.
A 30% gross profit percentage means that:
for each dollar of sales, the company has a cost of goods sold of 70 cents and for each dollar of sales, the company has a gross profit of thirty cents.
The two most common types of fraud impacting the financial statements are:
fraudulent financial reporting and misappropriation of assets.
Sales revenue less cost of goods sold is called:
gross profit.
Declaring and distributing stock dividends:
has no effect on total stockholder's equity.
Cash and cash equivalents do NOT include:
high-grade U.S. government securities maturing in 5 years.
The book value of a plant asset is defined as:
historical cost minus accumulated depreciation.
Opportunity in the fraud triangle arises from:
improper segregation of duties, improper access to assets, and weak control environment.
A sign(s) of increasing earnings quality is(are):
improving operating earnings/sales ratio, improving gross margin/sales ratio, and declining operating expenses compared to sales.
When 200 shares of $1 par value Common Stock are issued at $29 per share, Paid-in Capital in Excess of Par-Capital will:
increase $5,600.
Major Company purchased equipment to be used in its distribution center. All of the following should be included in the cost of the equipment EXCEPT for:
insurance costs after the equipment is up and running.
Increases and decreases in the long-term assets are reported on the statement of cash flows as:
investing activities.
Barbarino Corporation purchased land and a building for $1,200,000. An appraisal indicated that the land's market value is $500,000 and the building's market value is $1,000,000. When recording this transaction Barbarino should debt:
land for $400,000.
The long-term asset that is not depreciated or amortized is:
land.
Under U.S. GAAP, inventories are reported on the balance sheet at:
lower-of-cost-or-market.
The financial statements are the responsibility of:
management.
All of the following are needed to measure depreciation, EXCEPT for:
market value.
The three main components of the fraud triangle are:
motive, opportunity, and rationalization.
Under the direct method of preparing the operating section of the statements of cash flows, net cash provided by financing activities is $498,000. If the indirect method of preparing the statement of cash flows was used:
net cash provided by financing activities would be the same, $498,000.
A successful business must generate most of its cash from:
operating activities.
The three types of activities reported on the statement of cash flows are:
operating, investing, and financing.
Stockholders' equity is divided into:
retained earnings and paid-in capital.
When goods are shipped FOB destination:
revenue is recognized when the goods are received by the customer.
Bonds in a particular issue which mature in installments over a period of time are called:
serial bonds.
A depreciation method in which an equal amount of depreciation expense is assigned to each year of the asset's use is the:
straight-line method.
