acg final chapter 7-13
9. Interest revenue earned 10. NSF check 11. Deposit in transit 12. Service charge 13. Outstanding check a. added to the bank balance b. subtracted from the bank balance c .added to the book balance d. subtracted from the book balance
9. c 10. d 11. a 12. d 13. b
The Allowance for Bad Debts account has a credit balance of $ 8 300 before the adjusting entry for bad debts expense. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging of receivables method, the company's management estimates that uncollectible accounts will be $ 14 700. What will be the balance of the Allowance for Bad Debts reported on the balance sheet? A. $ 14 700 B. $ 13 230 C. $ 6 400 D. $ 23 000
A. $ 14 700
On January 1, 2017, Toland Sales issued $ 25 000 in bonds for $ 17 300. These are eight year bonds with a stated interest rate of 9% pay semiannual interest. Toland Sales uses the straight line method to amortize the bond discount. What is the bond carrying amount after the first interest payment on June 30, 2017? (Round your intermediate answers to the nearest dollar.) A. $ 17 781 B. $ 13 931 C. $ 21 631 D. $ 25 000
A. $ 17 781
On October 1, 2017, Ealys Jewelers accepted a 4month, 14% note for $ 6 500 in settlement of an overdue account receivable. The accounting period ends on December 31. Calculate the accrued interest on the note at December 31, 2017. (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.) A. $ 228 B. $ 303 C. $ 455 D. $ 910
A. $ 228
The Allowance for Bad Debts account has a credit balance of $ 2 000 before the adjusting entry for bad debts expense. The company's management estimates that 3% of net credit sales will be uncollectible for the year 2017. Net credit sales for the year amounted to $ 250 000. What will be the balance of Allowance for Bad Debts on the December 31, 2017 balance sheet? A. $ 9 500 B. $ 7 500 C. $ 7 440 D. $ 2 000
A. $ 9 500
Which of the following is true of the Fair Value Adjustment account for trading investments? A. It is considered as an adjunct account if it has a debit balance. B. It will always have a credit balance. C. It will always have a debit balance. D. It is considered as an adjunct account if it has a credit balance.
A. It is considered as an adjunct account if it has a debit balance.
Which of the following statements is true? A. Notes receivable usually have longer collection terms than accounts receivable. B. Notes receivable are always classified as current assets. C. Accounts receivable are liabilities. D. Accounts receivable are more liquid than cash.
A. Notes receivable usually have longer collection terms than accounts receivable.
Which of the following is true of internal control? A. One of the major purposes of internal control is to ensure that the assets are safeguarded. B. Internal controls are only necessary for public companies. C. A company's outside auditor is responsible for the company's internal control system. D. Internal control procedures tend to diminish the importance of operational efficiency.
A. One of the major purposes of internal control is to ensure that the assets are safeguarded.
Sales revenue for a sporting goods store amounted to $526,000 for the current period. All sales are on account and are subject to a sales tax of 10%. Which of the following would be included in the journal entry to record the sales transaction? A. a debit to Accounts Receivable for $578,600 B. a credit to Accounts Receivable for $526,000 C. a debit to Sales Revenue for $526,000 D. a debit to Sales Tax Payable for $52,600
A. a debit to Accounts Receivable for $578,600
Which of the following asset categories would include the cost of clearing land and removing unwanted buildings? A. land B. machinery and equipment C. buildings D. land improvements
A. land
Which of the following is an advantage of the corporate form of business? A. limited liability of stockholders B. less degree of government regulation C. separation of ownership and management D. low start-up costs
A. limited liability of stockholders
The amount of income taxes ________. A. required by the federal government for a corporation is calculated on a Form 1120 B. the corporation owes, but has not yet paid, is recorded as a debit to the Income Tax Payable account C. paid by the corporation, when it files the Form 1120, is recorded as a debit to the Income Tax Expense account and a credit to the Cash account D. the corporation owes, but has not yet paid, is reported as a long-term liability on the balance sheet
A. required by the federal government for a corporation is calculated on a Form 1120
A(n) ________ is represented by a certificate and is commonly traded on an exchange. A. security B. interest C. inventory D. intangible asset
A. security
The amount of cash interest the borrower pays each year is based on the ________. A. stated interest rate B. effective interest rate C. market interest rate D. market conditions on the day of payment
A. stated interest rate
A company purchased a computer on July 1, 2017 for $50,000. Estimated useful life of the computer was five years, and it has no residual value. Which of the following methods should be used to best match its expense against the revenue it produces? A. the double declining balance method B. the first in, first out method C. the units of production method D. the straight line method
A. the double declining balance method
Which of the following items must be examined by the controller or treasurer before signing a check? A. the purchase order B. the ledger C. the confirmation report D. the journal entry
A. the purchase order
Which of the following is included in the denominator of the acid test ratio? A. total current liabilities B. total current liabilities less accounts payable C. total current assets D. total liabilities
A. total current liabilities
The fair value of an investment is the price that ________. A. would be received if the company were to sell the investment on the market B. is not relevant for trading investments C. is always equal to the weighted average cost of the investment D. existed at the time of acquisition
A. would be received if the company were to sell the investment on the market
Jason's gross pay for the week is $1,900. His yearly pay is under the limit for OASDI. Assume that the rate for state and federal unemployment compensation taxes is 6% and that Jason's year-to-date pay has not yet exceeded the $7,000 cap. His yearly pay is under the limit for OASDI. What is the total amount of payroll taxes that his employer must record as payroll tax expenses? (Do not round your intermediate calculations. Assume a FICAlong OASDI Tax of 6.2% and FICAlong Medicare Tax of 1.45%.) A. $259.35 B. $117.80 C. $233.74 D. $107.35
A. $259.35
Accounts Receivable, December 31, 2017 $ 23 000 (debit) Allowance for Bad Debts, December 31, 2017 prior to adjustment 1 000 (debit) Net credit sales for 2017 94 000 Accounts written off as uncollectible during 2017 500 Bad debts expense is estimated by the aging of accounts receivables method. Management estimates that $ 3 150 of accounts receivable will be uncollectible. Calculate the amount of net accounts receivable after the adjustment for bad debts. A. $ 18 850 B. $ 19 850 C. $ 20 850 D. $ 18 350
B. $ 19 850
A ________ ownership in the investee's voting stock can significantly influence the investee's decisions. A. 15 percent to 20 percent B. 20 percent to 50 percent C. 10 percent D. 5 percent to 10 percent
B. 20 percent to 50 percent
On November 1, 2017, Oster, Inc. declared a dividend of $4.50 per share. Oster, Inc. has 23,000 shares of common stock outstanding and no preferred stock. Which of the following is the journal entry needed to record the declaration of the dividend? A. Debit Cash Dividends $103,500, and credit Cash $103,500. B. Debit Cash Dividends $103,500, and credit Dividends Payable Common $103,500. C. Debit Cash $103,500, and credit Dividends Payable Common $103,500. D. Debit Dividends Payable Common $103,500, and credit Retained Earnings $103,500.
B. Debit Cash Dividends $103,500, and credit Dividends Payable Common $103,500.
Which of the following statements about internal control is true? A. The treasurer and controller have the same responsibilities. B. Internal auditors ensure that the employees follow company policies. C. The internal control procedures are known as the "tone at the top." D. External auditors are employees of the company.
B. Internal auditors ensure that the employees follow company policies.
Which of the following statements about the times-interest-earned ratio is true? A. A lower ratio indicates a higher debt paying ability. B. The times-interest-earned ratio is also called the interest-coverage ratio. C. The times-interest-earned ratio is calculated by dividing gross income by interest expense. D. Debt reduction leads to an increase in interest expense.
B. The times-interest-earned ratio is also called the interest-coverage ratio.
Assume Intervale Railway is considering investing in Pale Co. stock for three months. The investment will represent 5% of the voting stock of Pale Co. How would the investment be classified? A. Significant interest investment B. Trading investment C. Held-to-maturity investment D. Controlling interest investment
B. Trading investment
Under the direct write off method, the entry to write off an uncollectible account will include ________. A. a credit to the Allowance for Bad Debts B. a debit to Bad Debts Expense account C. a debit to the customer's Account Receivable D. No entry is made to write off uncollectible accounts.
B. a debit to Bad Debts Expense account
Fred, Inc. owns a delivery truck. Which of the following costs, associated with the truck, will be capitalized and depreciated? A. replacement of tires B. modification for new use C. change of oil filters D. normal engine repair
B. modification for new use
Which of the following concepts represents time value of money? A. the concept that money loses its purchasing power over time B. the concept that money earns interest over time C. the concept that money can be converted into other currencies over time D. the concept that money becomes obsolete over time
B. the concept that money earns interest over time
The following information is needed to reconcile the cash balance for Johnson Catering Services. bullet A deposit of $5,800 is in transit. Outstanding checks total $1,100. The book balance is $6,000 at February 28, 2017. The bookkeeper recorded a $1,700 check as $17,300 in payment of the current month's rent. The bank balance at February 28, 2017 was $17,230. A deposit of $400 was credited by the bank for $4,000. A customer's check for $3,200 was returned for nonsufficient funds. The bank service charge is $70. What was the adjusted book balance? A. $18,470 B. $18,330 C. $18,400 D. $17,300
B. $18,330
On December 1, 2016, Gardner Products borrowed $ 90 000 on a 12%, 8 year note with annual installment payments of $ 11 250 plus interest due on December 1 of each subsequent year. Which of the following describes the first installment payment made on December 1, 2017? (Round your answer to the nearest whole number.) A. $ 11 250 principal plus $ 1 350 interest B. $ 11 250 principal plus $ 11 250 interest C. $ 11 250 principal plus $ 10 800 interest D. $ 10 800 interest only
C. $ 11 250 principal plus $ 10 800 interest
A deposit of $ 5 500 is in transit. Outstanding checks total $ 1 200 The book balance is $ 6 400 at February 28, 2017. The bookkeeper recorded a $ 1 500 check as $ 17 300 in payment of the current month's rent. The bank balance at February 28, 2017 was $ 18 030 A deposit of $ 400 was credited by the bank for $ 4 000 A customer's check for $ 3 400 was returned for nonsufficient funds. The bank service charge is $ 70 What was the adjusted book balance? A. $ 18 800 B. $ 18 100 C. $ 18 730 D. $ 18 870
C. $ 18 730
If bonds with a face value of $ 202 000 are issued at par, the amount of cash proceeds is ________. A. $ 242 400 B. $ 201 890 C. $ 202 000 D. $ 222 200
C. $ 202 000
Hawkeye Corporation has acquired a property that included both land and a building for $ 550 000. The corporation hired an appraiser who has determined that the market value of the land is $ 330 000 and that of the building is $ 410 000. At what amount should the corporation record the cost of land? (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.) A. $ 407 000 B. $ 148 500 C. $ 247 500 D. $ 275 000
C. $ 247 500
Marygrove Glassware Company issues $ 1 019 000 of 11 %, 10 year bonds at 98 on February 28, 2017. The bond pays interest on February 28 and August 31. On August 31, 2017, how much cash did Marygrove pay to the bondholders? A. $ 54 644 B. $ 57 446 C. $ 56 045 D. $ 112 090
C. $ 56 045
Issued 39 000 shares of common stock. Stock has par value of $ 1 per share and was issued at $ 19 per share. Earned net income of $ 71 comma 000 Paid no dividends. At the end of 2017, what is the total amount of paid in capital? A. $ 39 000 B. $ 812 000 C. $ 741 000 D. $ 71 000
C. $ 741 000
A company received a bank statement showing a balance of $ 75 000. Reconciling items included outstanding checks of $ 2 000 and a deposit in transit of $ 9 200. What is the company's adjusted bank balance? A. $ 67 800 B. $ 63 800 C. $ 82 200 D. $ 65 800
C. $ 82 200
On December 1, 2016, Fine Dining Products borrowed $ 98 000 on a 5%, 10 year note with annual installment payments of $ 9 800 plus interest due on December 1 of each succeeding year. On December 1, the principal amount was recorded as a long term note payable. What amount of the note payable will be shown as current portion of Long Term Note Payable on the balance sheet as of December 31, 2016? (Round your answer to nearest whole number.) A. $ 14 700 B. $ 19 600 C. $ 9 800 D. $ 4 900
C. $ 9 800
Which of the following is included in comprehensive income? A. Purchase of capital assets B. Owners' investments C. Foreign currency translation adjustments D. Payment of dividend
C. Foreign currency translation adjustments
Which of the following is true of the balance sheet presentation of the Allowance for Bad Debts? A. It is reported as an operating expense. B. It is reported as a current liability. C. It is shown as a contra account related to accounts receivable. D. It is reported as a separate, independent line item under current assets.
C. It is shown as a contra account related to accounts receivable.
Which of the following is a benefit provided by internal control? A. It guarantees that a business makes profit. B. It ensures that collusion will never happen. C. It promotes operational efficiency. D. It ensures timely collection of accounts receivables.
C. It promotes operational efficiency.
A petty cash fund was established with a $ 350 balance. It currently has cash of $ 45 and petty cash tickets totaling $ 305. Which of the following would be included in the entry to replenish the fund? A. a credit to Cash for $ 45 B. a credit to Petty Cash for $ 305 C. a credit to Cash for $ 305 D. a debit to Petty Cash for $ 45
C. a credit to Cash for $ 305
The gain or loss on the sale of a plant asset is determined by comparing market value of assets received with ________. A. residual value B. original cost C. book value D. salvage value
C. book value
The purchase of treasury stock ________. A. increases assets and decreases stockholders' equity B. decreases assets and increases stockholders' equity C. decreases assets and stockholders' equity D. increases assets and stockholders' equity
C. decreases assets and stockholders' equity
When a company pays cash for a long term investment in bonds, ________. A. current assets increase B. liabilities increase C. equity remains unchanged D. total assets increase
C. equity remains unchanged
A way to account for petty cash by maintaining a constant balance in the petty cash account and which at any time requires that cash plus petty cash tickets must total the amount allocated to the petty cash fund, is known as the ________. A. voucher system B. balanced system C. imprest system D. control system
C. imprest system
When using the allowance method, the write off of a receivable ________. A. decreases net income B. affects the net realizable value C. reduces the amount of the Allowance for Bad Debts account D. involves a contra revenue account
C. reduces the amount of the Allowance for Bad Debts account
When using the allowance method, after a company has previously written off an account, ________. A. the company cannot collect from these customers because their accounts have been written off B. the company does not need to re establish the receivable account C. when a customer pays on an account that has been written off, the company needs to reverse the write off to the Allowance for Bad Debts account and then record the receipt of cash D. the company continues to send monthly statements to the customers whose accounts have been written off
C. when a customer pays on an account that has been written off, the company needs to reverse the write off to the Allowance for Bad Debts account and then record the receipt of cash
Which of the following is the correct formula for calculating rate of return on total assets? A. (Net income - Interest expense) / Total assets B. Total equity / Total assets C. (Net income + Interest expense) / Average total assets D. (Net income - Interest expense) / Average total asset
C. (Net income + Interest expense) / Average total assets
Washington Enterprises had net income for 2016 of $ 109 000. Washington had 35 000 shares of common stock outstanding at the beginning of the year and 50 000 shares of common stock outstanding at the end of the year. There were 8 000 shares of preferred stock outstanding all year. During 2016, Washington declared and paid preferred dividends of $ 30 000. What is Washington's earnings per share? (Round the answer to two decimal places.) A. $ 2.56 B. $ 2.18 C. $ 1.58 D. $ 1.86
D. $ 1.86
On October 1, 2017, Parkin, Inc. made a loan to one of its customers. The customer signed a 9 month note for $ 130 000 at 14 %. Calculate the maturity value of the note. (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.) A. $ 111 800 B. $ 148 200 C. $ 116 350 D. $ 143 650
D. $ 143 650
On December 1, 2017, Going Places, Inc. sold machinery to a customer for $ 22 000. The customer could not pay at the time of sale but agreed to pay 9 months later and signed an 9 month note at 11% interest. What was the total amount of cash collected by Going Places on the maturity of the note? (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.) A. $ 1 815 B. $ 24 420 C. $ 20 185 D. $ 23 815
D. $ 23 815
The Allowance for Bad Debts account has a debit balance of $ 9 000 before the adjusting entry for bad debts expense. After analyzing the accounts in the accounts receivable subsidiary ledger, the company's management estimates that uncollectible accounts will be $ 15 000. What will be the amount of the adjustment in the Allowance for Bad Debts account? A. $ 22 900 B. $ 15 000 C. $ 23 250 D. $ 24 000
D. $ 24 000
Accounts receivable, December 31, 2017 $ 40 000 (debit) Allowance for Bad Debts, December 31, 2017 prior to adjustment $1 700 (debit) Net credit sales for 2017 $175 000 Accounts written off as uncollectible during 2017 $16 000 Cash sales during 2017 $29 000 Bad debts expense is estimated by the aging of receivables method. Management estimates that $ 5 200 of accounts receivable will be uncollectible. Calculate the amount of bad debts expense for 2017. A. $ 5 450 B. $ 7 800 C. $ 3 500 D. $ 6 900
D. $ 6 900
Which of the following is a measure for discouraging theft for a retail store that accepts cash receipts over the counter? A. The sales clerk uses the machine tape to record the journal entry for cash receipts and sales revenue. B. The store clerk deposits the cash in the bank. C. At the end of the day, the sales clerk proves the cash by comparing the cash in the drawer against the machine's record of cash sales. D. A receipt is issued for each transaction to ensure that each sale is recorded.
D. A receipt is issued for each transaction to ensure that each sale is recorded.
________ are equity securities in which the investor owns between 20% and 50% of the investee's voting stock. A. Held to maturity investments B. Controlling interest investments C. Available for sale investments D. Significant interest investments
D. Significant interest investments
Evaluated Receipts Settlement is ________. A. an organizational plan and all the related measures adopted by an entity to safeguard assets, encourage employees to follow company policies, promote operational efficiency, and ensure accurate and reliable accounting records B. a streamlined process that bypasses paper documents altogether C. a process that eliminates the need for separation of duties D. a procedure that compresses the payment approval process into a single step by comparing the receiving report to the purchase order
D. a procedure that compresses the payment approval process into a single step by comparing the receiving report to the purchase order
A petty cash fund was established with a $ 600 balance. It currently has cash of $ 17 and petty cash tickets as shown below: Travel expense $ 100 Office supplies expense 285 Equipment rental expense 78 Which of the following would be included in the journal entry to replenish the Petty Cash fund? A. debit to Petty Cash for $ 120 B. credit to Petty Cash for $ 120 C. credit to Cash Short & Over for $ 120 D. debit to Cash Short & Over for $ 120
D. debit to Cash Short & Over for $ 120
Marketable securities are also known as ________. A. long term investments B. debt investments C. held to maturity investments D. short term investments
D. short term investments
When bonds are retired at maturity ________. A. the bondholders are paid the the face value plus the unamortized premium or less the unamortized discount B. the entry to retire the bonds may include a gain or loss on retirement of bonds C. the carrying value equals the face value plus the unamortized premium or less the unamortized discount D. the carrying value always equals the face value
D. the carrying value always equals the face value
When a company receives a dividend payment on available for sale investments, the ________. A. total liabilities will decrease B. long term assets will decrease C. total assets will remain unaffected D. total equity will increase
D. total equity will increase
The expense for warranty costs is recorded in the period ________. A. when the product is repaired or replaced B. when cash is collected from the sale of the product C. when cash is paid to repair or replace the product D. when the product is sold
D. when the product is sold
The employees of Royal Clothes achieved all of the sales goals for 2017. Royal decides to reward the employees with a bonus of 20% on annual net income, after deducting the bonus. The net income before the calculation of the bonus is $312,000. What is the amount of the bonus? A. $55,059 B. $12,480 C. $62,400 D. $52,000
D. $52,000
Which of the following items should be amortized? A. goodwill B. natural resources C. tangible property, plant, and equipment, other than land D. patents, copyrights, trademarks
D. patents, copyrights, trademarks
A corporation issues 16 000 shares of its $ 1 stated value common shares. The issue price is $ 8 per share. The credit to the Common Stock account is $ 128 000. True False
False
A fully depreciated asset that is still in service is not reported as an asset on the balance sheet. True False
False
A system cannot be overcome or broken into if its internal controls are properly designed and structured. True False
False
When a company issues stock at an amount greater than the par value, a gain is recorded for the difference between the issue price and the par value. True False
False
A payroll register is a schedule that summarizes the earnings, withholdings, and net pay for each employee. True False
True
Bad debt expense is not debited when a company writes off an account receivable when using the allowance method because the company has already recorded the Bad Debt Expense as an adjusting entry. True False
True
In a bank reconciliation, a NSF check will be shown on the book side of the reconciliation. True False
True
In a bank reconciliation, a deposit in transit will be shown on the bank side of the reconciliation. True False
True
In a bank reconciliation, outstanding checks will be shown on the bank side of the reconciliation. True False
True
In order to keep accurate records about the collection of cash for a previously written off account, collection of cash for a previously written off account, a business should re establish the Accounts Receivable by debiting the receivable account. True False
True
Investors use the times-interest-earned ratio to evaluate a company's ability to pay interest expense. True False
True
Repair work that generates a capital expenditure because it extends a plant asset's useful life past the normal expected life is known as an extraordinary repair. True False
True
Secured bonds give bondholders the right to take specified assets of the issuer if the issuer fails to pay principal or interest. True False
True
Securities are represented by a certificate and are commonly traded on an exchange. True False
True
State unemployment compensation tax (SUTA) is not withheld from employees' gross earnings. True False
True
The Public Company Accounting Oversight Board oversees the work of auditors of public companies. True False
True
The aging of receivables method is a balance sheet approach of estimating uncollectible accounts. True False
True
The asset turnover ratio measures the amount of net sales generated for each average dollar of total assets invested. True False
True
The face value of a bond payable minus the current balance of the discount account or plus the current balance of the premium account is the bond's carrying amount. True False
True
Treasury stock is a contra equity account. True False
True
Warranty Expense is shown on the income statement at the estimated amount. True False
True
When a bond is matured, the carrying value always equals the face value. True False
True
The balance sheet shows the balance in Bonds Payable plus any discount or minus any premium. True False
False
The declaration of a stock dividend creates a liability for the corporation. True False
False
When a business sells a plant asset for book value, a gain or loss should be recorded. True False
False
A signature card is a card that shows each authorized person's signature for a bank account. True False
True
Accounts receivable are also known as trade receivables. True False
True
An asset is considered to be obsolete when a newer asset can perform the job more efficiently. True False
True
An information system is one of the five components by which a company can achieve its internal control objectives. True False
True
Equity securities, in which the investor owns less than 20% ownership in the voting stock of the investee, can be either trading investments or available for sale investments. True False
True
Exchanges of plant assets that have commercial substance require any gain or loss on the transaction to be recognized. True False
True
FICA tax is a tax that is paid both by the employer and the employee. True False
True
If a debt security is purchased at a discount, the discount must be amortized when the interest revenue is earned. True False
True
