D102 Financial Accounting Quiz

On January 1, Alliah Company has total assets of $700,000, total liabilities of $300,000, and total equity of $400,000. On January 1, Alliah Company entered into the following two transactions: a. Purchased goods for resale. Total cost of this inventory was $50,000; Alliah Company paid $10,000 cash and the remainder was put on the company's credit accounts with its suppliers. b. Purchased land costing $150,000. Paid $20,000 cash and signed a mortgage note payable for the remaining $130,000. After these two transactions, what is the total of Alliah Company's total liabilities? $410,000 $570,000 $470,000 $340,000

$470,000

The Freedom Rock Corporation has total assets of $94,000 and total liabilities of $37,500. What is the amount of its owners' equity? $37,500 $56,500 $94,000 $131,500

$56,500

Endothon Company uses a periodic inventory system. Beginning inventory for the period was $130,000. Purchases for the period totaled $550,000. A physical count of ending inventory revealed inventory of $100,000. What is the cost of goods sold? $450,000 $550,000 $520,000 $580,000

$580,000 Beginning Inventory $130,000 Plus: Purchases 550,000 = Cost of Goods Available for Sale 680,000 Less: Ending Inventory 100,000 = Cost of Goods Sold $580,000

Quiet Flag Industries uses a perpetual inventory system. Beginning inventory for the period was $100,000. Purchases for the period totaled $550,000. A physical count of ending inventory revealed inventory of $130,000. Cost of goods sold according to the perpetual system is $460,000. What is the amount of inventory shrinkage? $30,000 $60,000 $130,000 $190,000

$60,000 Beginning inventory 100,000 Plus: Purchases 50,000 = Cost of goods available for sale 650,000 Less: Preliminary cost of goods sold 460,000 Ending inventory, predicted 190,000 Less: Ending inventory, actual 130,000 Cost of missing inventory $60,000 Inventory Shrinkage Expense 60,000 Inventory 60,000

On January 1, Endothon Company has total assets of $700,000, total liabilities of $400,000, and total equity of $300,000. On January 1, Endothon Company entered into the following two transactions: a. Purchased goods for resale. Total cost of this inventory was $50,000; Endothon Company paid $10,000 cash and the remainder was put on the company's credit accounts with its suppliers. b. Sold land for cash. The original cost of the land was $80,000. The land was sold for $62,000. After these two transactions, what is the total of Endothon Company's total assets? · $722,000 · $758,000 · $740,000 · $798,000

$722,000

On January 1, Company Synesthor has total assets of $700,000, total liabilities of $400,000, and total equity of $300,000. On January 1, Company Synesthor entered into the following two transactions: a. Purchased goods for resale. Total cost of this inventory was $90,000; Company Synesthor paid $50,000 cash and the remainder was put on the company's credit accounts with its suppliers. b. Sold land for cash. The original cost of the land was $62,000. The land was sold for $80,000. After these two transactions, what is the total of Company Synesthor's total assets? $740,000 $758,000 $798,000 $808,000

$758,000

10% every six months 5% every six months 5% every year 10% every two years

5% every six months - To compute the correct interest rate when interest is compounded semiannually, divide the stated interest rate by two. This is the interest rate for every six-month period. So, 10% ÷ 2 = 5% every six months.

A company received a bank statement at the end of the month. The statement contained these items: Ending balance $7,000 Bank service charge for the month 300 Interest earned and added by the bank to the account balance 100 In comparing the bank statement to its own cash records, the controller of the company found these items: Deposits made but not yet recorded by the bank $3,000 Checks written and mailed but not yet recorded by the bank 5,000 Before making any adjustment suggested by the bank statement, the cash balance according to the company's books is $5,200. What is the correct cash balance as of the end of the month? 6,800 4,000 5,000 3,200

5,000

On January 1 of Year 1, a company purchased a machine for $30,000. The machine is expected to have an eight-year useful life and salvage value of $6,000. Assuming that the company uses double-declining balance depreciation, what is the amount of depreciation expense on this machine for Year 2? 7,500 5,625 5,500 6,000

5,625 The amount of the machine's depreciation expense for Year 2 is as follows: Straight-line rate: 100% ÷ 8 years = 12.5% Double the straight-line rate: 2 × 12.5% = 25% Depreciation expense Year 1 = Beginning book value × Rate = $30,000 × 25% = $7,500 Depreciation expense Year 2 = Beginning book value × Rate = $22,500 × 25% = $5,625

On January 1 of Year 1, a company purchased a machine for $20,000. The machine is expected to have a 10-year useful life and salvage value of $1,000. Assuming that the company uses straight-line depreciation, what is the book value of this machine at the end of Year 6? 8,600 11,400 12,000 8,000

8,600 (20,000 - 1,000) / 10 = 1,900 1,900 x 6 = 11,400 20,000 - 11,400 = 8,600 Book Value after year 6

What is a classified balance sheet? A balance sheet that distinguishes between current and long-term assets A balance sheet that is for a period of time rather than as of a point in time A balance sheet that separates liabilities from equities A balance sheet that is not publicly disclosed

A balance sheet that distinguishes between current and long-term assets

What is a general journal? - A collection of accounts used in the normal course of business - A schedule reconciling the sum of assets with the sum of liabilities and equities - A chronological record of all transactions of a business - The record of the minutes of the meetings of the board of directors

A chronological record of all transactions of a business

Which type of account is the allowance for bad debts? A contra-liability account A contra-asset account A contra-expense account A contra-revenue account

A contra-asset account - The allowance for bad debts is a contra-asset account, shown as a subtraction from Accounts Receivable on the balance sheet.

Which kind of account is Sales Returns and Allowances? An expense account A contra-asset account A revenue account A contra-revenue account

A contra-revenue account - Like sales discounts, Sales Returns and Allowances is a contra account that is deducted from Sales Revenue on the income statement.

How are dividends typically recorded with debits and credits? A debit, representing a reduction in equity A credit, representing a reduction in assets A credit, representing an increase in equity A debit, representing an increase in assets

A debit, representing a reduction in equity - Dividends are typically recorded with debits. A debit to dividends represents a reduction in owners' equity.

What does a debit entry to an equity account represent? A revenue An increase A cash revenue A decrease

A decrease

With respect to assets, what does a credit represent? An increase An expense A revenue A decrease

A decrease

With respect to owners' equity, what does a debit represent? A decrease An increase A revenue An expense

A decrease

What does a debit entry to a liability account represent? An expense A decrease A revenue An increase

A decrease - A debit to a liability account represents a decrease in that account.

In what setting might a company use special journals as well as a general journal? A large company with many transactions Companies with very few cash transactions A small company with few transactions Companies with very few purchase transactions

A large company with many transactions

Endothon Company is involved in litigation over who must clean up a toxic waste site near one of the company's factories. It is probable, but not certain, that the company will be required to pay for the cleanup. How should the company report this lawsuit in its financial statements? No liability in the balance sheet; some disclosure in the financial statement notes No liability in the balance sheet; no disclosure in the financial statement notes A liability in the balance sheet; some disclosure in the financial statement notes A liability in the balance sheet; no disclosure in the financial statement notes

A liability in the balance sheet; some disclosure in the financial statement notes

What is owners' equity? The sum of operating, investing, and financing cash flows An economic resource that is owned or controlled by a company An obligation to pay cash, transfer other assets, or provide services to someone else A residual amount representing the net assets available after all obligations have been satisfied

A residual amount representing the net assets available after all obligations have been satisfied *residual = a quantity remaining after other things have been subtracted or allowed for

Which item is an asset? Retained earnings Capital stock Accounts receivable Accounts payable

Accounts receivable

What is bad debt expense? - Amount of inventory lost, stolen, or sold during the year - Amount of uncollectible accounts created by credit sales during the year - Amount of gross profit divided by sales for the year - Amount of wear and tear on long-lived assets during the year

Amount of uncollectible accounts created by credit sales during the year

What is a promissory note? - An agreement between a buyer of a product and the seller of that product. - An agreement between an employer and an employee with respect to wages. - An agreement to pay back a borrowed amount, with interest. - An agreement to repurchase goods that are deemed to be defective.

An agreement to pay back a borrowed amount, with interest.

What is an asset? - The sum of operating, investing, and financing cash flows - An economic resource that is owned or controlled by a company - An obligation to pay cash or provide services to someone else - A residual amount representing the net amount available after all obligations have been satisfied

An economic resource that is owned or controlled by a company

What is a sales discount? A supplier reduction in inventory purchase cost The amount of cash collected from customers The difference between selling price and sales tax An incentive for the buyer to pay more quickly

An incentive for the buyer to pay more quickly

What does a debit entry to an asset account represent? A decrease An expense A revenue An increase

An increase

In an accounting context, what is a contingency? - An uncertain circumstance that will not be resolved until a future event occurs - An amount received in advance from a customer to help pay for the construction of a specially ordered item - A loss or a gain on the sale of an item of property, plant, or equipment - A bank loan that a company has arranged in advance, but which has not yet been taken

An uncertain circumstance that will not be resolved until a future event occurs

For financial reporting purposes, how is inventory shrinkage typically reported in the financial statements? As part of Allowance for Bad Debts As part of Administrative Expense As part of Purchase Returns and Allowances As part of Cost of Goods Sold

As part of Cost of Goods Sold

Which is the proper description of the accounting equation? Owners' Equity = Liabilities Assets = Liabilities + Owners' Equity Owners' Equity = Assets Assets = Liabilities

Assets = Liabilities + Owners' Equity

How is the ending Retained Earnings balance computed? Beginning Retained Earnings + Cash − Total Liabilities Net Income + Cash − Total Liabilities Beginning Retained Earnings + Net Income − Dividends Net Income + Cash − Dividends

Beginning Retained Earnings + Net Income − Dividends

For which balance sheet account does the statement of cash flows provide a detailed explanation of the year-to-year change? Cash Accumulated Depreciation Retained Earnings Paid-In Capital

Cash

On May 1, Pruhart Tech borrowed $8,000 under a one-year loan agreement. The annual interest rate is 13%. As of the end of the year, no entry has yet been made to record the accrued interest on the loan. Which debit or credit is correctly included in the adjusting journal entry necessary on December 31 to record the unpaid interest? Debit to Interest Expense for $8,000 Credit to Interest Payable for $693 Debit to Interest Payable for $8,000 Credit to Interest Expense for $1,040

Credit to Interest Payable for $693 ($8,000 x 0.13 × 8 ÷ 12 = $693) Interest Expense 693 Interest Payable 693

At the end of the year, before any closing entries are made, which account typically has a debit balance? Sales Revenue Capital Stock Dividends Long-Term Debt

Dividends Debit => Assets, Expenses, and Dividends. Credit => Liabilities, Owners' Equity (Capital Stock and Retained Earnings), and Revenues.

Which financial statement provides a detailed explanation of one component in the year-to-year change in the retained earnings balance? Statement of cash flows. Balance sheet. Income statement. Trial balance.

Income statement

Which principle requires that the expense associated with a compensated absence be accounted for in the period in which it is earned by the employee? Revenue recognition Matching Allowance Discount

Matching

Endothon Company paid its property taxes on July 1 of Year 1. Those property taxes relate to the period from July 1 of Year 1 through June 30 of Year 2. As of December 31, Year 1, what item will appear in Endothon's financial statements with respect to these property taxes? Prepaid Property Tax Liability Unpaid Property Tax Revenue Prepaid Property Tax Asset Unpaid Property Tax Liability

Prepaid Property Tax Asset - If a company pays its property taxes at the beginning of the property tax year, then as of December 31 any amount that relates to months in the coming year is reported as a prepaid property tax asset.

What is the meaning of the term "debit"? Recorded on the right side Recording of a decrease Recorded on the left side Recording of an increase

Recorded on the left side

What is a balance sheet? - Report of the operating, investing, and financing cash flows of a company during a period - Report of the total of the balances of all of a company's bank accounts - Report of the revenues and expenses of a company during a period - Report of the assets, liabilities, and equity of a company as of a point in time

Report of the assets, liabilities, and equity of a company as of a point in time - The balance sheet reports the resources of a company (assets), the company's obligations (liabilities), and the difference between what is owned (assets) and what is owed (liabilities), called owners' equity.

What legal right belongs to the owner of a patent? - Right to use a certain symbol or likeness for a specific number of years - Right to use another company's business ideas in conducting business for a specified number of years - Right to protection from other companies selling the product for a specified number of years - Right to operate a business of a specified type for a specified number of years

Right to protection from other companies selling the product for a specified number of years

What is "gross profit"? Sales − Cost of Goods Sold. Accounts Receivable − Accounts Payable Total Revenues − Total Expenses Total Assets − Total Liabilities

Sales − Cost of Goods Sold. - The difference between Sales and Cost of Goods Sold represents the difference between a company's total retail selling prices to customers and those items' total wholesale purchase costs from suppliers.

Here are some accounts from Endothon Company's financial records: Cost of Goods Sold Cash Sales Inventory Interest Expense Accounts Payable What should be used to compute Endothon's net income? Sales, Cost of Goods Sold, and Interest Expense Cash, Inventory, and Accounts Payable Inventory and Accounts Payable Cash and Accounts Payable

Sales, Cost of Goods Sold, and Interest Expense

What is an operating activity? Repaying loans Selling land Buying buildings Selling goods

Selling goods

Paradigm Toys purchased inventory costing $1,000 but paid early, so only had to pay $980. What is the proper accounting for the $20 purchase discount? - Add to Sales Revenue - Add to Accounts Receivable - Subtract from Inventory Cost - Subtract from Cash

Subtract from Inventory Cost - A purchase discount for paying early is considered to be a reduction in the purchase cost of the inventory and so is subtracted from inventory cost.

What is net income? The amount of cash on hand at the end of the year The amount by which revenues exceed expenses The amount of assets consumed through business operations The total amount of assets reported in the balance sheet

The amount by which revenues exceed expenses

What is one way that an error can be made in recording a transaction in a journal entry? The amount entered in the journal entry is incorrect. Revenues, expenses, and dividends are posted in the general ledger. Both liabilities and equities are reported in the balance sheet. Assets and liabilities are posted in the general ledger.

The amount entered in the journal entry is incorrect. - Correct! Errors can be introduced into the journal entries for the following reasons: if the supporting documentation is lost or ignored, so the transaction is not recorded at all; if the amount entered into the journal entry is incorrect; or if the accounts involved in the journal entry are incorrectly identified.

What is expense? The amount of assets consumed through business operations The amount of bank loans obtained during the year The amount of bank loans repaid during the year The amount of assets created through the sale of goods and services

The amount of assets consumed through business operations

What is revenue? The amount of cash, accounts receivable, and inventory totaled The amount of assets consumed through business operations The amount of cash on hand at the end of the year The amount of assets created through the sale of goods and services

The amount of assets created through the sale of goods and services

In a corporation, who has the power to properly authorize the payment of dividends? The controller The accounts payable clerk The purchasing agent The board of directors

The board of directors

What is an outside director? The director of company logistics (shipments from suppliers and to customers) The marketing director and the purchasing agent/director The chief executive officer (CEO) and the chief financial officer (CFO) The members of a company's board of directors who are not officers of the company

The members of a company's board of directors who are not officers of the company

What is amortization? - The process of allocating an intangible asset's cost to the years during which the asset is used - The process of allocating a short-term asset's cost to the years during which the asset is used - The process of allocating a tangible asset's cost to the years during which the asset is used - The process of allocating a natural resource's cost to the years during which the resource is used

The process of allocating an intangible asset's cost to the years during which the asset is used

Oliver Costa owns a small business where he internally develops, manufactures, and sells decorative figurines directly to customers. To create his figurines, he owns assets including tools, machines, raw materials used to produce the figurines, and a large stock of the completed figurines themselves. As Costa prepares his balance sheet for the first time, he must classify his assets into their various appropriate categories. Which of Costa's assets is classified as inventory on the balance sheet? The machines and the tools used to produce the figurines The completed figurines and the tools used to produce the figurines The machines and the completed figurines The raw materials and the completed figurines

The raw materials and the completed figurines

What is articulation?

The relationship among financial statements whereby an item on the income statement or statement of cash flows helps explain the period-to-period change in an item on the balance sheet

What is articulation? - The relationship between the total of the assets on the balance sheet and the total of the liabilities and equities on the balance sheet - The process of separating cash flows into three categories: operating, investing, and financing - The process of recording, analyzing, and summarizing a company's transactions in order to be able to prepare the financial statements - The relationship among financial statements whereby an item on the income statement or statement of cash flows helps explain the period-to-period change in an item on the balance sheet

The relationship among financial statements whereby an item on the income statement or statement of cash flows helps explain the period-to-period change in an item on the balance sheet

When does an accountant perform transaction analysis? When preparing the balance sheet When posting the accounts When recording items in the journal When preparing the income statement

When recording items in the journal - All necessary transaction analysis is done when a transaction is recorded, in debit-and-credit form, in the journal.

If goods are sold and shipped with FOB destination shipping terms, when does ownership transfer from the seller to the buyer? - When the goods are loaded into the transport vehicle by the seller - When the goods are paid for, in cash, by the buyer - When the goods are in transit from the seller to the buyer - When the goods reach the buyer's location

When the goods reach the buyer's location - Correct! If the seller pays for the shipping costs, the arrangement is known as FOB (free-on-board) destination, and the seller owns the merchandise from the time it is shipped until it is delivered to the buyer.

When should repair and maintenance costs be capitalized? When the amount of the cost of the repair is small When they are expected to benefit future periods When they are in the first year of the life of the asset When the expenditure is made during the first half of the year

When they are expected to benefit future periods

With a LIFO inventory cost flow assumption, which inventory units are assumed to be remaining at the end of the period to be reported in ending inventory? The old units The new units The cost of goods sold units A mixture of units

The old units

With respect to liabilities, what does a credit represent? A decrease An increase A revenue An expense

An increase

Four Types of Adjusting Entries

1. Unrecorded Receivables (interest) 2. Unrecorded Liabilities (electricity) 3. Prepaid Expenses (paid rent in advance) 4. Unearned Revenues (paid in advance by customers)

Expanded Accounting Equation

Assets = Liabilities + Paid-in Capital + (Revenues - Expenses - Dividends)

With an average inventory cost flow assumption, which inventory units are assumed to be sold first? The new units The consignment units A mixture of units The old units

A mixture of units

Why is cash a tempting target for theft? - Because it is closed to Retained Earnings at the end of the year - Because it has a debit balance in the general ledger - Because it is the easiest asset to spend if stolen - Because it is reported in the balance sheet rather than in the income statement

Because it is the easiest asset to spend if stolen

What caution needs to be exercised when using a declining-balance depreciation method to compute depreciation expense during the final years of an asset's life? - Must increase the useful life to double the initial number of years - Cannot reduce book value below salvage value - Cannot report depreciation expense as an expense in the income statement - Must decrease the useful life to half the initial number of years

Cannot reduce book value below salvage value

A company made a $1,000 cash payment on a loan. Of the $1,000 cash paid, $300 was for interest expense and $700 was a payment to reduce the loan balance. What is included in the journal entry necessary to record this loan payment? Credit to interest expense for $300 Debit to cash for $1,000 Credit to loan payable for $700 Debit to interest expense for $300

Debit to interest expense for $300 Interest Expense 300 Loan Payable 700 Cash 1,000

What name is given to a 12-month accounting period? Accrual year Fiscal year Recognition year Calendar year

Fiscal year

What is a company's gross profit percentage? Net Income ÷ Sales Net Income ÷ Owners' Equity Gross Profit ÷ Net Income Gross Profit ÷ Sales

Gross Profit ÷ Sales Gross profit percentage = Gross Profit / Sales.

For a public company, who must compose the audit committee? Company controller Chief financial officer Outside directors Chief executive officer

Outside directors

What is a use of cash from a financing activity? Borrowing money Paying dividends Paying rent Buying a building

Paying dividends

Which item is considered inventory for a supermarket? Display shelves Transport equipment Vegetables Cash register

Vegetables

Here are inventory purchase and sales data for Synesthor Company. (Note: There was no inventory before the purchase made on January 1.) Purchased on January 1: 100 units, $9 cost per unit Purchased on January 16: 200 units, $8 cost per unit Purchased on January 25: 400 units, $7 cost per unit Sold on January 31: 500 units, $10 selling price per unit Assume that Synesthor Company uses FIFO. What is the cost of ending inventory at the end of January? $3,900 $3,600 $1,400 $1,700

$1,400 Cost of Goods Sold 100 × $9 = $900 200 × $8 = $1,600 200 × $7 = $1,400 Total = $3,900 Ending Inventory 200 × $7 = $1,400 Total = $1,400

Quiet Flag Industries uses a perpetual inventory system. Beginning inventory for the period was $130,000. Purchases for the period totaled $550,000. A physical count of ending inventory revealed inventory of $100,000. Cost of goods sold according to the perpetual system is $460,000. What is the amount of inventory shrinkage? $30,000 $60,000 $120,000 $130,000

$120,000 Beginning Inventory $130,000 Plus: Purchases 550,000 = Cost of Goods Available for Sale 680,000 Less: Preliminary Cost of Goods Sold 460,000 Ending Inventory, Predicted $220,000 Less: Ending Inventory, Predicted $100,000 Cost of Missing Inventory $120,000 Inventory Shrinkage Expense 120,000 Inventory 120,000

On January 1, Alliah Company had these equity account balances. Retained Earnings 150 Paid-in Capital 200 The information relates to things that happened during the year. a. Shareholders invested an additional $40 cash in the business. b. Net income for the year was $30 c. Dividends for the year were $50. What is Alliah Company's retained earnings at the end of the year? $370 $230 $130 $170

$130 Beginning Retained Earnings 150 Plus Net Income 30 Less Dividends (50) Ending Retained Earnings 130

During the month of July, Autojor Company entered into these business transactions: a. Sold inventory costing $100 for a total of $180. Cash of $30 was received, and the remaining $150 was put on account. b. Paid cash for employee wages of $15. c. Paid cash dividends of $10. d. Paid cash of $20 for July's rent. e. Paid cash of $25 to buy a new machine. What is the amount of Autojor Company's total expenses for the month of July? $160 $145 $170 $135

$135

Smith Company received a bank statement at the end of the month. Ending Balance $12,000 Bank service charge for the month 75 Interest earned and added by the bank to the account balance 130 Deposits made but not yet recorded by the bank $6,500 Checks written and mailed but not yet recorded by the bank 3,600 Before making any adjustment suggested by the bank statement, the cash balance according to Smith's books is $14,845. What is the correct cash balance as of the end of the month? $14,900 $14,400 $12,055 $17,745

$14,900

On January 1, Dellberg Company has total assets of $400,000, total liabilities of $100,000, and total equity of $300,000. On January 1, Dellberg Company entered into the following two transactions. a. Purchased goods for resale. Total cost of this inventory was $90,000; Dellberg Company paid $10,000 cash and the remainder was put on the company's credit accounts with its suppliers. b. Sold land for cash. The original cost of the land was $80,000. The land was sold for $62,000. After these two transactions, what is the total of Dellberg Company's liabilities? $180,000 $198,000 $190,000 $162,000

$180,000

The Whole Pine Company's liabilities equal $124,000, and its stockholders' equity totals $68,500. What is the amount of its assets? $68,500 $192,500 $124,000 $55,500

$192,500 The correct calculation is shown as follows: Assets = Liabilities + Equity; Assets = $124,000 + $68,500 = $192,500

On January 1 of Year 1, Ridgeland Company purchased a machine for $10,000. The machine is expected to have a 10-year useful life and salvage value of $1,000. Assuming that the company uses double-declining-balance depreciation, what is the amount of depreciation expense on this machine for Year 1? $1,000 $1,800 $2,000 $900

$2,000 The amount of depreciation expense for Year 1 is as follows: Straight-line rate: 100% ÷ 10 years = 10% Double the straight-line rate: 2 × 10% = 20% Depreciation expense = Beginning book value × Rate = $10,000 × 20% = $2,000

The following are inventory purchase and sales data for Paradigm Toys. (Note: There was no inventory before the purchase made on January 1.) purchased on January 1: 100 units, $9 cost per unit purchased on January 16: 300 units, $8 cost per unit purchased on January 25: 400 units, $7 cost per unit; sold on January 31: 500 units, $10 selling price per unit Assume that Paradigm Toys uses FIFO. What is the cost of ending inventory at the end of January? $4,000 $2,500 $2,100 $2,287

$2,100 Cost of Goods Sold 100 × $9 = $900 300 × $8 = $2,400 100 × $7 = $700 Total = $4,000 Ending Inventory 300 × $7 = $2,100

The following are inventory purchase and sales data for a company. (Note: There was no inventory before the purchase made on January 1.) purchased on January 1: 100 units, $9 cost per unit purchased on January 16: 300 units, $8 cost per unit purchased on January 25: 400 units, $7 cost per unit sold on January 31: 500 units, $10 selling price per unit Assume that the company uses the average cost method. What is the cost of ending inventory at the end of January? $3,813 $2,100 $2,500 $2,287

$2,287 Cost of Goods Sold 500 × $7.625* = $3,813 Ending Inventory 300 × $7.625 = $2,287 *Average Cost: $6,100 ÷ 800 units = $7.625 $5,000 Sales − $3,813 Cost of Goods Sold = $1,187 Gross Profit

Here are inventory purchase and sales data for Wild Parsley Company. (Note: There was no inventory before the purchase made on January 1.) Purchased on January 1: 100 units, $9 cost per unit Purchased on January 16: 300 units, $8 cost per unit Purchased on January 25: 400 units, $7 cost per unit Sold on January 31: 500 units, $10 selling price per unit Assume that Wild Parsley Company uses LIFO. What is the cost of ending inventory at the end of January ? $2,287 $2,100 $2,500 $3,600

$2,500 Cost of Goods Sold 400 × $7 = $2,800 100 × $8 = $800 Total = $3,600 Ending Inventory 100 × $9 = $900 200 × $8 = $1,600 Total = $2,500 Sales $5,00 - $3,600 Cost of Goods Sold = $1,400 Gross Profit

A company uses a perpetual inventory system. Beginning inventory for the period was $100,000. Purchases for the period totaled $550,000. A physical count of ending inventory revealed inventory of $170,000. Cost of goods sold according to the perpetual system is $460,000. What is the amount of inventory shrinkage? $130,000 $190,000 $20,000 $60,000

$20,000 Beginning Inventory$100,000 Plus: Purchases550,000 = Cost of Goods Available for Sale650,000 Less: Preliminary Cost of Goods Sold460,000 Ending Inventory, Predicted$190,000 Less: Ending Inventory, Actual$170,000 Cost of Missing Inventory$20,000 Inventory Shrinkage Expense 20,000Inventory 20,000

On January 1, Pruhart Company had these assets, liabilities, and equity: Cash $100 Inventory 140 Accounts Payable 70 Paid-in Capital 150 Retained Earnings 20 During the year, Pruhart Company entered into the following transactions: a. Sold Inventory costing $80 for a total of $120. Cash of $30 was received, and the remaining $90 was put on account. b. Paid cash for employee wages of $15. c. Paid cash dividends of $10. What is Pruhart Company's net income for the year? $15 $25 $105 $45

$25

The following are inventory purchase and sales data for Alliah Company. (Note: There was no inventory before the purchase made on January 1.) purchased on January 1: 100 units, $9 cost per unit purchased on January 16: 300 units, $8 cost per unit purchased on January 25: 400 units, $7 cost per unit sold on January 31: 500 units, $10 selling price per unit Assume that Alliah Company uses LIFO. What is the cost of goods sold for January? $3,813 $2,500 $3,600 $4,000

$3,600 Cost of Goods Sold 400 × $7 = $2,800 100 × $8 = $800 Total = $3,600 Ending Inventory 100 × $9 = $900 200 × $8 = $1,600 Total = $2,500 $5,000 Sales − $3,600 Cost of Goods Sold = $1,400 Gross Profit

Strime Company's assets equal $104,000, and its stockholders' equity totals $68,500. What is the amount of its liabilities? $35,500 $104,000 $172,500 $68,500

$35,500 The accounting equation is Assets = Liabilities + Equity. For Strime Company, $104,000 = Liabilities + $68,500. Rearrangement of this equation gives Liabilities = $104,000 - $68,500 = $35,500.

Here are inventory purchase and sales data for a company. (Note: There was no inventory before the purchase made on January 1.) purchased on January 1: 100 units, $9 cost per unit purchased on January 16: 300 units, $8 cost per unit purchased on January 25: 400 units, $7 cost per unit sold on January 31: 500 units, $10 selling price per unit Assume that the company uses FIFO. What is the cost of goods sold for January? $2,100 $3,600 $3,813 $4,000

$4,000 Cost of Goods Sold 100 × $9 = $900 300 × $8 = $2,400 100 × $7 = $700 Total = $4,000 Ending Inventory 300 × $7 = $2,100

On January 1 of Year 1, Merrilton Company purchased a machine for $20,000. The machine is expected to have a 6-year useful life and salvage value of $2,000. The company uses double-declining-balance depreciation. What is the amount of depreciation expense on this machine for Year 2? $5,000 $3,333 $4,444 $4,000

$4,444 The answer is calculated as follows: Straight-line rate: 100% ÷ 6 years = 16.67% Double the straight-line rate: 2 × 16.67% = 33.33% Depreciation expense Year 1 = Beginning book value × Rate = $20,000 × 33.33% = $6,666 Depreciation expense Year 2 = Beginning book value × Rate = $20,000 - $6,666 = $13,334 × 33.33% = $4,444

Here are inventory purchase and sales data for Merrilton Company. (Note: There was no inventory before the purchase made on January 1.) Purchased on January 1: 400 units, $9 cost per unit Purchased on January 16: 500 units, $8 cost per unit Purchased on January 25: 100 units, $7 cost per unit Sold on January 31: 400 units, $10 selling price per unit Assume that Merrilton Company uses the average cost method. What is the cost of ending inventory at the end of January? $5,200 $3,600 $4,980 $3,320

$4,980 Cost of Goods Sold 400 × $8.30 = $3,320* **Average Cost: $8,300 ÷ 1,000 units = $8.30 Ending Inventory 600 × $8.30 = $4,980 Sales $4,000 − $3,320 Cost of Goods Sold = $680 Gross Profit

Freedom Rock Bicycles uses a periodic inventory system. Beginning inventory for the period was $100,000. Purchases for the period totaled $550,000. A physical count of ending inventory revealed inventory of $170,000. What is the cost of goods sold? $450,000 $520,000 $550,000 $480,000

$480,000 Beginning Inventory $100,000 Plus: Purchases 550,000 = Cost of Goods Available for Sale 650,000 Less: Ending Inventory 170,000 = Cost of Goods Sold $480,000

Corbin Company received a bank statement at the end of the month. The statement contained these items: Ending balance $3,000 Bank service charge for the month 750 Interest earned and added by the bank to the account balance 20 In comparing the bank statement to the company's own cash records, the controller of Corbin Company found these items: Deposits made but not yet recorded by the bank $5,000 Checks written and mailed but not yet recorded by the bank 3,000 Before making any adjustment suggested by the bank statement, the cash balance according to Corbin's books is $5,730. What is the correct cash balance as of the end of the month? $5,000 $7,730 $7,000 $2,270

$5,000

Jay Company received a bank statement at the end of the month. The statement contained these items: Ending balance$8,000 Bank service charge for the month 55 Interest earned and added by the bank to the account balance 30 In comparing the bank statement to the company's own cash records, the controller of Jay Company found these items: Deposits made but not yet recorded by the bank $3,600 Checks written and mailed but not yet recorded by the bank 6,500 Before making any adjustment suggested by the bank statement, the cash balance according to Jay's books is $5,125. What is the correct cash balance as of the end of the month? $2,225 $7,975 $5,100 $6,300

$5,100 Balance per bank statement 8,000 Add: Deposits in transit 3,600 Deduct: Outstanding checks (6,500) Correct balance 5,100 Balance per books 5,125 Add: Interest earned 30 5,155 Deduct: Bank service charge (55) Correct balance 5,100

Whole Pine Company uses a periodic inventory system. The new accountant has come from a company where a perpetual inventory system was used and is still a little confused with the workings of a periodic system. For example, it is now the end of the period, and the accountant is not sure how to determine cost of goods sold. With a perpetual system, the cost of goods sold is tracked, in real time, automatically by the system. Beginning Inventory for the period was $100,000. Purchases for the period totaled $550,000. A physical count revealed Ending Inventory of $130,000. What is the Cost of Goods sold? $550,000 $580,000 $520,000 $450,000

$520,000 Beginning Inventory 100,000 Plus: Purchases 550,000 = Cost of Goods Available for Sale 650,000 Less: Ending Inventory 130,000 = Cost of Goods Sold $520,000

George Company received a bank statement at the end of the month. The statement contained these items: Ending balance $7,500 Bank service charge for the month 40 Interest earned and added by the bank to the account balance 200 In comparing the bank statement to the company's own cash records, the controller of George Company found these items: Deposits made but not yet recorded by the bank $2,000 Checks written and mailed but not yet recorded by the bank 3,500 Before making any adjustment suggested by the bank statement, the cash balance according to George's books is $5,840. What is the correct cash balance as of the end of the month? $4,500 $4,340 $7,660 $6,000

$6,000

January 1 of Year 1, Pruhart Company purchased a machine for $20,000. The machine is expected to have a 9-year useful life and salvage value of $2,000. The company uses straight-line depreciation. What is the book value of this machine at the end of Year 6? $6,667 $10,000 $6,000 $8,000

$8,000 Depreciation expense = [Cost - Salvage Value] ÷ Useful Life = [$20,000 - $2,000] ÷ 9 years = $2,000 per year. After 6 years: Accumulated Depreciation = 6 × $2,000 = $12,000 Cost $20,000 Less: Accumulated Depreciation (12,000) Book value: $8,000

The liabilities of a company are $46,200, and its owners' equity is $35,800. What is the amount of this company's assets? $10,400 $35,800 $46,200 $82,000

$82,000 Assets = $82,000 or $46,200 + $35,800

When Should Revenue Be recognized?

(1) The work has been substantially completed (the company has done something). (2) Cash, or a valid promise of future payment, has been received (the company has received something in return).

The following are some data from a company's financial statements: Building, end of year 1,800 Capital Stock, end of year 450 Loans Payable, end of year 850 Accounts Receivable, end of year 300 Cash, end of year 100 Accounts Payable, end of year 400 Cash, end of year 400 Accounts Payable, end of year 400 Dividends during the year 250 Retained Earnings, beginning of year 650 Inventory, end of year 500 Net Income during the year 600 What is this company's ending retained earnings balance? 1,200 1,000 100 800

1,000 Retained Earnings, beginning of year 650 + Net Income during the year 600 - Dividends during the year (250) = Retained Earnings, end of year 1,000

The following are some data from a company's financial statements: Accounts Payable, end of year 400 Dividends during the year 50 Retained Earnings, beginning of year 850 Inventory, end of year 500 Net Income during the year 300 Building, end of year 1,700 Capital Stock, end of year 450 Loans Payable, end of year 650 Accounts Receivable, end of year 300 Cash, end of year 100 What is this company's ending Retained Earnings balance? 800 1,200 100 1,100

1,100 Retained Earnings, beginning of year 850 + Net Income during the year 300 - Dividends during the year (50) = Retained Earnings, end of year 1,100

On January 1 of Year 1, a company purchased a patent for $400,000. The patent had an original legal life of 20 years, but only eight years remain. The patent is expected to have continued economic value during these eight years. As with almost all intangible assets, the patent is assumed to have zero salvage value at the end of its economic useful life. Assuming that the company uses straight-line amortization, what is the book value of this patent at the end of Year 6? 350,000 100,000 50,000 300,000

100,000 Amortization Expense = [Cost - Salvage Value] ÷ Useful Life Thus, [$400,000 - $0] ÷ 8 years = $50,000 After 6 years, Accumulated Amortization = 6 × $50,000 = $300,000 $400,000 (Cost) - 300,000 (Accumulated Amortization*) = $100,000 (Book Value)

A company received a bank statement at the end of the month. The statement contained these items: Ending balance $10,000 Bank service charge for the month 120 Interest earned and added by the bank to the account balance 200 In comparing the bank statement to its own cash records, the controller of the company found these items: Deposits made but not yet recorded by the bank $5,100 Checks written and mailed but not yet recorded by the bank 3,600 Before making any adjustment suggested by the bank statement, the cash balance according to the company's books is $11,420. What is the correct cash balance as of the end of the month? (Verify this amount by reconciling the bank statement with the cash balance on the books.) 10,700 10,080 12,920 11,500

11,500

On January 1 of Year 1, a company purchased a trademark for $400,000. The trademark has an estimated economic life of 10 years. As with almost all intangible assets, the trademark is assumed to have zero salvage value at the end of its economic useful life. Also, as with almost all intangible assets, the company uses straight-line amortization. What is the book value of this trademark at the end of Year 7? 280,000 40,000 120,000 350,000

120,000 The book value of this trademark at the end of Year 7 is the following: Amortization Expense = [Cost - Salvage Value] ÷ Useful Life Thus, [$400,000 - $0] ÷ 10 years = $40,000 After 7 years, Accumulated Amortization = 7 × $40,000 = $280,000 $400,000 (Cost) - 280,000 (Accumulated Amortization*) = $120,000 (Book Value) *Note: It is often the case that Accumulated Amortization is not shown in the balance sheet; only the net book value is reported.

On January 1, a company had these equity account balances: Retained Earnings 200 Paid-In Capital 20 The following information relates to things that happened during the year: Shareholders invested an additional $50 cash in the business. Net loss for the year was $40. Dividends for the year were $10. (Note: It is unusual, but not impossible, for a company to pay dividends even in a year in which it reports a net loss instead of net income.) What is this company's retained earnings at the end of the year? 200 220 170 150

150 Beginning Retained Earnings 200 Plus Net Income (Less Net Loss) (40) Less Dividends (10) Ending Retained Earnings 150

On January 1 of Year 1, Whole Pine Inc. purchased a machine for $35,000. The machine is expected to have a four-year useful life and salvage value of $5,000. Assuming that this company uses double-declining balance depreciation, what is the amount of depreciation expense on this machine for Year 1? 17,500 15,000 7,500 8,750

17,500 Depreciation Expense = Beginning Book Value × Rate Straight-line rate: 100% ÷ 4 years = 25% Double the straight-line rate: 2 × 25% = 50% $35,000 (Beginning Book Value) × 50% (Rate) = $17,500 (Depreciation Expense)

On January 1, Endothon Company had these equity account balances: Retained Earnings 150 Paid-In Capital 20 The information relates to things that happened during the year: Shareholders invested an additional $50 cash in the business. Net income for the year was $60. Dividends for the year were $10. What is Endothon Company's retained earnings at the end of the year? 200 150 100 130

200 Beginning Retained Earnings 150 Plus Net Income (Less Net Loss) 60 Less Dividends (10) Ending Retained Earnings 200

On January 1, Dellberg Company had these equity account balances. Retained Earnings 150 Paid-in Capital 20 This information relates to things that happened during the year. a. Shareholders invested an additional $50 cash in the business. b. Net income for the year was $80. c. Dividends for the year were $10. What is Dellberg Company's retained earnings at the end of the year? 290 270 120 220

220 Computation of Ending Retained Earnings: Beginning Retained Earnings 150 Plus Net Income 80 Less Dividends (10) Ending Retained Earnings 220

On January 1 of Year 1, a company purchased a machine for $100,000. The machine is expected to have a five-year useful life and salvage value of $5,000. Assuming that the company uses double-declining balance depreciation, what is the amount of depreciation expense on this machine for Year 2? 24,000 18,000 20,000 40,000

24,000 The amount of depreciation expense on this machine for Year 2 is as follows: Straight-line rate: 100% ÷ 5 years = 20% Double the straight-line rate: 2 × 20% = 40% Depreciation expense Year 1 = Beginning book value × Rate = $100,000 × 40% = $40,000 Depreciation expense Year 2 = Beginning book value × Rate = $60,000 × 40% = $24,000

If the payment terms are 3/15, n/60, what is meant by the "3/15"? 3% discount if payment is made within 60 days 3% discount if payment is made within 75 days 3% discount if payment is made within 15 days 3% discount if payment is made within 45 days

3% discount if payment is made within 15 days

On January 1 of Year 1, a company purchased a machine for $10,000. The machine is expected to have a 10-year useful life and salvage value of $1,000. Assuming that the company uses straight-line depreciation, what is the book value of this machine at the end of Year 3? 7,300 6,300 7,000 3,000

7,300 Depreciation Expense = [Cost - Salvage Value] ÷ Useful Life Thus, [$10,000 - $1,000] ÷ 10 years = $900 After 3 years, Accumulated Depreciation = 3 × $900 = $2,700 $10,000 (Cost) - 2,700 (Accumulated Depreciation) = $7,300 (Book Value)

On January 1 of Year 1, Quiet Flag Industries purchased a machine for $30,000. The machine is expected to have an eight-year useful life and salvage value of $6,000. Assuming that the company uses double-declining balance depreciation, what is the amount of depreciation expense on this machine for Year 1? 6,000 6,500 7,000 7,500

7,500 Depreciation expense = Beginning book value × Rate Straight-line rate: 100% ÷ 8 years = 12.5% Double the straight-line rate: 2 × 12.5% = 25% Thus, $30,000 (Beginning Book Value) × 25% (Rate) = $7,500 (Depreciation Expense)

On January 1 of Year 1, Quiet Flag Industries purchased a machine for $20,000. The machine is expected to have a 5-year useful life and salvage value of $1,000. Assuming that the company uses double-declining-balance depreciation, what is the amount of depreciation expense on this machine for Year 1? 7,600 8,000 4,000 3,800

8,000 Straight-line rate: 100% ÷ 5 years = 20% Double the straight-line rate: 2 × 20% = 40% Depreciation expense = Beginning book value × Rate = $20,000 × 40% = $8,000

What is a chart of accounts? A chronological listing of accounts The reporting sequence of the income statement The reporting sequence of the balance sheet A list of accounts used by a company to classify transactions

A list of accounts used by a company to classify transactions

With an average inventory cost flow assumption, which inventory units are assumed to remain at the end of the period to be reported in ending inventory? The old units The cost of goods sold units The new units A mixture of units

A mixture of units

How does a mortgage loan differ from an ordinary loan? - A mortgage loan is related to a specific asset. - A mortgage loan has no interest. - A mortgage loan cannot be repaid early. - A mortgage loan is classified as equity on the balance sheet.

A mortgage loan is related to a specific asset.

In which type of business would accrual basis accounting result in the same income measure as cash basis accounting? - A small manufacturing business, in which routine inventory items are produced in bulk now, stored for two or three years, and then sold to customers - A large manufacturing business, in which orders are received now, cash advances are collected from customers now, and delivery of manufactured products occurs many years from now - A medium-sized construction business, in which most of the assets are long-term construction equipment items that can last for up to 15 years - A small business, in which all sales amounts are collected in cash at the time of the sale and all expenses are paid in cash immediately

A small business, in which all sales amounts are collected in cash at the time of the sale and all expenses are paid in cash immediately - Correct! In a small cash-sales and cash-expenses business, accrual basis accounting gives the same measure of net income as cash basis accounting because the cash flows occur at the same time as does the economic activity.

A company has these accounts in its financial records at the end of the year: Land Retained Earnings Accounts Receivable Loans Payable Accounts Payable Capital Stock Cash Which accounts are liabilities? Accounts Payable and Loans Payable Cash, Capital Stock, and Retained Earnings Capital Stock and Retained Earnings Cash, Accounts Receivable, and Land

Accounts Payable and Loans Payable

How does a person compute the net balance in Accounts Receivable that is reported in the balance sheet? Sales − the Allowance for Bad Debts Accounts Receivable − the Allowance for Bad Debts Sales − Cost of Goods Soldterm-198 Allowance for Bad Debts − Sales Discounts

Accounts Receivable − the Allowance for Bad Debts Correct! The net balance in Accounts Receivable that is reported in the balance sheet is computed as the following: Accounts Receivable minus the Allowance for Bad Debts.

What is one way that an error can be made in recording a transaction in a journal entry? - Cost of goods sold is reported in the income statement. - Accounts involved in the journal entry are incorrectly identified. - Debit total must be equal to credit total in the trial balance. - Revenues, expenses, and dividends are closed to retained earnings.

Accounts involved in the journal entry are incorrectly identified. Errors can be introduced into the journal entries if (1) the supporting documentation is lost or ignored so that the transaction is not recorded at all, (2) the amount entered into the journal entry is incorrect, and (3) the accounts involved in the journal entry are incorrectly identified.

Which item is a liability? - Accounts receivable - Capital stock - Accounts payable - Retained earnings

Accounts payable - AP is the amount owed as a result of the purchase of goods and services on credit.

Which statement is correct? - Valuation basis accounting provides a more accurate picture of a company's profitability. - Cash basis accounting provides a more accurate picture of a company's profitability. - Asset basis accounting provides a more accurate picture of a company's profitability. - Accrual basis accounting provides a more accurate picture of a company's profitability.

Accrual basis accounting provides a more accurate picture of a company's profitability. -Correct! Accrual basis accounting provides a more accurate picture of a company's profitability. Accordingly, accrual basis accounting is required by generally accepted accounting principles (GAAP).

What are investing activities? - Activities that are part of the day-to-day business of a company - Activities associated with forecasting sales and overhead costs - Activities associated with buying and selling long-term assets like land, buildings, and equipment - Activities whereby cash is obtained from or repaid to owners and creditors

Activities associated with buying and selling long-term assets like land, buildings, and equipment

In the context of research and development, what is research? Creating a plan for new or improved products Increasing the useful life of tangible assets Expenditures that should be recorded as assets Activities undertaken to discover new knowledge

Activities undertaken to discover new knowledge Research is an activity undertaken to discover new knowledge that will be useful in developing new products, services, or processes.

What is the proper accounting for the inbound inventory shipping costs called "freight in"? Add to Inventory Cost Add to Cost of Goods Sold Add to Administrative Expense Add to Accounts Receivable

Add to Inventory Cost - Inbound shipping costs, called freight in, are considered to be part of the purchase cost of the inventory and so are added to inventory cost.

Frank Elsholz is the chief financial offer (CFO) for a large aviation parts company. Frank has been tasked with improving internal controls by ensuring that adequate documentation is being generated, supporting the orders for each part and implementing, internally, overall checks and balances over the ordering, receipt, and storage of parts in inventory inside the company. What are the two detective controls that Frank has been tasked with implementing in this situation? Proper authorizations and physical control Adequate documents and independent checks Independent checks and segregation of duties Segregation of duties and physical control

Adequate documents and independent checks

What is one way that an error can be made when posting to the general ledger? A closing entry amount is posted to retained earnings. An inventory amount is posted as an asset. An accounts payable amount is posted as a liability. An asset amount is posted to an expense account.

An asset amount is posted to an expense account.

Paul Jones has worked for the Candle Retail Company since the company was originally started 10 years ago. The company has now grown to a size where it is important to set up more sophisticated internal controls, including separation of duties within the company, starting with controls over the ordering of raw materials and payments of the related supplier invoices. What are the three specific functions that Paul should keep separate when setting up more sophisticated internal controls over the raw material ordering and payment functions? Recording, physical possession, and posting Approving, evaluating, and ordering Physical possession, adjusting, and posting Approving, recording, and physical possession

Approving, recording, and physical possession (1) authorizing and approving the execution of transactions; (2) recording the transactions in the accounting records; (3) having physical possession of or control over the assets involved in transactions.

During Year 1, it is claimed that Synesthor Company's operations caused some damage to the air and water in its community. This claim is currently under government investigation. If the investigation reveals that Synesthor Company did in fact cause damage to the air and water, Synesthor Company will be required to pay a fine of $500,000. The investigation is expected to be completed in September of Year 2. In which case should Synesthor Company report a liability for the environmental fine in the balance sheet on December 31 of Year 1? - As of December 31, Year 1, Synesthor Company has already paid the fine. - As of December 31, Year 1, there is a remote likelihood that Synesthor Company will have to pay the fine. - As of December 31, Year 1, it is probable that Synesthor Company will have to pay the fine. - As of December 31, Year 1, it is possible that Synesthor Company will have to pay the fine.

As of December 31, Year 1, it is probable that Synesthor Company will have to pay the fine.

When a machine is purchased, what is the proper accounting for the costs paid for shipping and installation? As part of cost of goods sold in the year of the machine purchase As part of the cost of the machine As an operating expense in the year of the machine purchase As a liability in the current asset section of the balance sheet

As part of the cost of the machine

What is the normal order of a chart of accounts? Owners' equity, liabilities, assets, expenses, and sales Liabilities, expenses, assets, owners' equity, and sales Sales, expenses, owners' equity, assets, and liabilities Assets, liabilities, owners' equity, sales, and expenses

Assets, liabilities, owners' equity, sales, and expenses

Alliah Company is purchasing a large inventory of tutus for their line of dance wear. If the tutus are sold and shipped with FOB shipping point shipping terms, when does ownership of the goods transfer from the seller to Atliah Company? - At the point of delivery; thus, the goods belong to Alliah while in transit - At the point of shipping; thus, the goods belong to Alliah while in transit - At the point of shipping; thus, the goods belong to the seller while in transit - At the point of delivery; thus, the goods belong to the seller while in transit

At the point of shipping; thus, the goods belong to Alliah while in transit

In the journal entry to record salary payments to employees, why is the amount of Salary Expense not equal to the amount of Salaries Payable? Because of company income taxes Because of sales taxes Because of payroll taxes Because of property taxes

Because of payroll taxes

At the end of the year, what amount is reflected in the Retained Earnings balance before the closing entries are made and posted? Net Income Cash − Dividends Beginning Retained Earnings Assets − Liabilities

Beginning Retained Earnings *The Retained Earnings account is left untouched during the year, so before the closing entries are made the Retained Earnings balance still reflects the balance as of the beginning of the year.

Through what mechanism do the owners of a corporation—the shareholders—govern the corporation? Chief operating officer Chief financial officer Initial public offering Board of directors

Board of directors

Which of these items is a source of cash for a financing activity? Paying rent Borrowing money Paying dividends Buying a building

Borrowing money

What is a use of cash in an investing activity? Borrowing cash from a bank Selling an old, used machine Buying a building Collecting cash from customers

Buying a building

Which of these items is a use of cash in an investing activity? Collecting cash from customers Selling an old building Buying a machine Borrowing cash from a bank

Buying a machine

What is an investing activity? Paying wages Repaying loans Incorrect. Repaying loans is a financing activity. Selling goods Buying buildings

Buying buildings

Which account is shown in a post-closing trial balance? Sales Revenue Cost of Goods Sold Dividends Cash

Cash - The nominal accounts will not be shown since they have been closed and thus have zero balances. Only the real accounts will have current balances.

Here are some financial statement items for Sparkit Company. Cash flow from investing activities during the year Retained earnings at the beginning of the year Cash flow from operating activities during the year Net income for the year Cash flow from financing activities during the year Cash balance at the beginning of the year Which items are needed to compute Sparkit's ending cash balance for the year? - Net income for the year, cash flow from operating activities during the year, cash flow from investing activities during the year, and cash flow from financing activities during the year - Retained earnings at the beginning of the year, cash flow from operating activities during the year, cash flow from investing activities during the year, and cash flow from financing activities during the year - Cash balance at the beginning of the year, cash flow from operating activities during the year, cash flow from investing activities during the year, and cash flow from financing activities during the year - Cash balance at the beginning of the year, net income during the year, cash flow from investing activities during the year, and retained earnings at the beginning of the year

Cash balance at the beginning of the year, cash flow from operating activities during the year, cash flow from investing activities during the year, and cash flow from financing activities during the year - The ending cash balance is computed using the beginning cash balance and then adding the cash flows from the three different types of activities: operating, investing, and financing.

What is one cash management tool? Retained earnings Closing entries Cash budget Adjusting entries

Cash budget - Cash management practices include careful cash budgeting (to forecast future cash needs) and keeping as much cash as possible in higher-yielding investments rather than just in no-interest bank accounts.

Which statement is true regarding sales taxes? Sales taxes increase the reported sales revenue of a company. Cash collected from sales taxes is used by the company to pay for employee benefits. Cash collected from sales taxes must be forwarded to the correct government agency. Sales taxes increase the reported operating expenses of a company.

Cash collected from sales taxes must be forwarded to the correct government agency.

The revenue recognition principle states that revenues are recorded when two main criteria have been met. One of those criteria is that the earnings process is substantially complete. What is the other criterion? - Standard forecasting procedures are implemented. - Cash has been collected or collectibility is reasonably assured. - Necessary documentation has been filed with the appropriate government agency. - Revenue targets for the period have been reached.

Cash has been collected or collectibility is reasonably assured.

Bullzai Company was started last year when the shareholders invested $70 cash into the company. At that time, Bullzai also borrowed $100 cash from a local bank. Bullzai then purchased inventory for $120 cash. This year Bullzai Company sold all of the inventory for $55 cash (that is NOT a typographical error; the amount received for all of the inventory was only $55 cash). Assuming that there is no interest on the loan, which statement is true with respect to Bullzai Company's balance sheet after the sale of the inventory? Cash is $105. Inventory is $65. Total Owners' Equity is $135. Total Owners' Equity is $70.

Cash is $105

The following are some financial statement items for the year for a company: cash paid for dividends cash received from new loans cash paid to employees for wages cash paid to purchase a new building cash received from customers cash received from the sale of land cash received as new investment from owners What is included in the computation of this company's total cash from financing activities? - Cash paid to purchase a new building and cash received from the sale of land - Cash paid for dividends, cash received from new loans, and cash received as a new investment from owners - Cash paid to purchase a new building, cash received from the sale of land, and cash paid to employees for wages - Cash paid to employees for wages and cash received from customers

Cash paid for dividends, cash received from new loans, and cash received as a new investment from owners

Here are some financial statement items for the year for Kretsmart Company: cash paid for dividends cash received from new loans cash paid to employees for wages cash paid to purchase a new building cash received from customers cash received from the sale of land cash received as new investment from owners What is included in the computation of Kretsmart's total cash from investing activities? - Cash paid to employees for wages and cash received from customers - Cash received from new loans and cash received as new investment from owners - Cash paid for dividends, cash received from new loans, and cash received as a new investment from owners - Cash paid to purchase a new building and cash received from the sale of land

Cash paid to purchase a new building and cash received from the sale of land

Here are some financial statement items for the year for Endothon Company: Cash paid for dividends Cash paid to employees for wages Cash paid to purchase a new building Cash received from customers Cash received from the sale of land Cash paid for rent Cash received as new investment from owners Which items should be included in the computation of Endothon's operating cash flow for the year? - Cash received from customers, cash paid for rent, and cash paid to employees for wages - Cash paid for dividends and cash received as new investment from owners - Cash paid to purchase a new building and cash received from the sale of land - Cash received from customers and cash paid for dividends

Cash received from customers, cash paid for rent, and cash paid to employees for wages

Alliah Company has these accounts in its financial records at the end of the year: Land Retained Earnings Accounts Receivable Loans Payable Accounts Payable Capital Stock Cash Which accounts are assets? Additional Paid-In Capital and Capital Stock Cash, Accounts Receivable, and Land Accounts Payable and Loans Payable Capital Stock and Retained Earnings

Cash, Accounts Receivable, and Land

Bullzai Company's financial records include these accounts at the end of the year: Land Accounts Receivable Buildings Inventory Loans Payable Accounts Payable Retained Earnings Capital Stock Cash Which set of items composes a complete listing of Bullzai's current assets? Cash, Inventory, and Capital Stock Cash, retained earnings, and capital stock Cash, buildings, and land Cash, accounts receivable, and inventory

Cash, accounts receivable, and inventory - Bullzai's current assets are cash, accounts receivable, and inventory. These are the assets that are expected to be used or converted into cash within the next 12 months.

What happens to the dividends account at the end of the year? Reported as an expense in the income statement Closed to the retained earnings account Closed to the cash account Reported as an asset in the balance sheet

Closed to the retained earnings account

For balance sheet purposes, what, under the accounting rules, is defined as cash? Money on deposit at banks Coins, currency, checks, and money on deposit at banks Coins and currency Checks

Coins, currency, checks, and money on deposit at banks

Which of these items is a source of cash for an operating activity? Collecting cash from customers Selling an old, used machine Borrowing cash from a bank Buying a building

Collecting cash from customers

Who are the true owners of a corporation? Major bank lenders Board of directors Preferred stockholders Common stockholders

Common stockholders

Which item is closed to a zero balance at the end of each accounting period? Loans Payable Retained Earnings Cost of Goods Sold Cash

Cost of Goods Sold

Which item is an expense item? Accounts Payable Cost of Goods Sold Sales Cash

Cost of Goods Sold - Cost of Goods Sold represents the amount of inventory (an asset) consumed through business operations—giving the inventory to the customer in a sales transaction.

Here are inventory purchase and sales data for Dellberg Company. (Note: There was no inventory before the purchase made on January 1.) Purchased on January 1: 100 units, $9 cost per unit Purchased on January 16: 300 units, $8 cost per unit Purchased on January 25: 400 units, $7 cost per unit Sold on January 31: 500 units, $10 selling price per unit Assume that Dellberg Company uses the average cost method. What is the cost of goods sold for January? $3,813 $3,600 $4,000 $2,287

Cost of Goods Sold 500 × $7.625* = $3,813 Ending Inventory 300 × $7.625 = $2,287 *Average Cost: $6,100 ÷ 800 units = $7.625 Sales $5,000 - $3,813 Cost of Goods Sold = $1,187 Gross Profit

In the context of research and development, what is development? Applying accelerated depreciation to projects Creating a plan for new or improved products A budgetary approach to project management The activity of discovering of new knowledge

Creating a plan for new or improved products

On August 17, a credit sale was made for $1,000. Terms for the sale were 2/10, n/30. Cash for the sale was collected on August 21. What debit or credit should be included in the journal entry to record the cash collection on August 21? Debit Accounts Payable for $1,000. Credit Sales Discounts for $20. Credit Accounts Receivable for $1,000. Debit Sales Discounts for $1,000.

Credit Accounts Receivable for $1,000. August 17 Accounts Receivable 1,000 Sales 1,000 August 21 Cash ($1,000 x 0.98) 980 Sales Discounts 20 Accounts Receivable 1,000

On January 16, a credit sale was made for $300. Terms for the sale were 3/15, n/30. Cash for the sale was collected on February 14. Which debit or credit should be included in the journal entry to record the cash collection on February 14? Credit Accounts Receivable for $300 Debit Accounts Receivable for $300 Debit Sales Discounts for $9 Credit Sales Discounts for $9

Credit Accounts Receivable for $300 January 16 Accounts Receivable 300 Sales 300 February 14 (Payment was not received within the 15-day discount period) Cash 300 Accounts Receivable 300

On July 15, goods were sold for $10,000; cash of $2,000 was received, and the $8,000 remainder was on account. The customer returned the goods before paying any of the remaining $8,000 on account. What debit or credit should be included in the journal entry on the books of the seller to record the return of the goods? Credit Cash for $10,000. Debit Accounts Receivable for $8,000. Debit Accounts Receivable for $10,000. Credit Accounts Receivable for $8,000.

Credit Accounts Receivable for $8,000. Sales Returns and Allowances 10,000 Cash 2,000 Accounts Receivable 8,000

Credit sales for the year were $100,000. Collections on account were $88,000. Which debit or credit should be included in the summary journal entry necessary to record the $88,000 cash collection on account? Debit Sales for $88,000 Credit Accounts Receivable for $88,000 Debit Accounts Receivable for $88,000 Credit Sales for $88,000

Credit Accounts Receivable for $88,000 Cash 88,000 Accounts Receivable 88,000

Strime Company's controller estimated bad debt expense using the percentage of accounts receivable method. Total sales for the year were $500,000. The ending balance in accounts receivable was $100,000. An examination of the outstanding accounts at the end of the year indicates that approximately 12 percent of these accounts will ultimately prove to be uncollectible. Before any adjustment, the balance in the Allowance for Bad Debts is $700 (credit). Total accounts written off as uncollectible during the year were $14,700. Which debit or credit is included in the adjusting entry to record bad debt expense for the year? Credit Allowance for Bad Debts for $12,700. Debit Allowance for Bad Debts for $11,300. Debit Allowance for Bad Debts for $12,700. Credit Allowance for Bad Debts for $11,300.

Credit Allowance for Bad Debts for $11,300. Bad Debt Expense 11,300 Allowance for Bad Debts 11,300 $100,000 x 0.12 = $12,000 - $700 credit = $11,300

Autojor Company estimated bad debt expense for the year to be $21,000. Which debit or credit is included in the adjusting entry to record bad debt expense for the year? Debit Allowance for Bad Debts for $21,000. Credit Allowance for Bad Debts for $21,000. Credit Accounts Receivable for $21,000. Debit Accounts Receivable for $21,000.

Credit Allowance for Bad Debts for $21,000. Bad Debt Expense 21,000 Allowance for Bad Debts 21,000

Jaunty Coffee Co. estimated bad debt expense for the year to be $8,000. Which debit or credit is included in the adjusting entry to record bad debt expense for the year? Credit Accounts Receivable for $8,000 Credit Cash for $8,000 Credit Allowance for Bad Debts for $8,000 Credit Bad Debt Expense for $8,000

Credit Allowance for Bad Debts for $8,000 Bad Debt Expense 8,000 Allowance for Bad Debts 8,000

On July 15, Quiet Flag Industries sold goods for $10,000 cash. Just three days later, the customer returned the goods and was given a full cash refund. Which debit or credit should be included in the journal entry on the books of the seller to record the return of the goods? Credit Sales Returns and Allowances for $10,000 Debit Accounts Receivable for $10,000 Credit Accounts Receivable for $10,000 Credit Cash for $10,000

Credit Cash for $10,000 Sales Returns and Allowances 10,000 Cash 10,000

What are bad debts? Sales returns and allowances not taken Sales discounts not taken Credit customers who do not pay Inventory suppliers who do not deliver

Credit customers who do not pay

On January 1 of Year 1, Pruhart Company purchased a machine for $20,000. The machine is expected to have a 10-year useful life and salvage value of $3,000. What is included in the journal entry necessary to record depreciation expense on this machine at the end of Year 1? (Note: the company uses straight-line depreciation.) Credit to Depreciation Expense for $1,700 Credit to Depreciation Expense for $2,000 Credit to Accumulated Depreciation for $2,000 Credit to Accumulated Depreciation for $1,700

Credit to Accumulated Depreciation for $1,700 [$20,000 - $3,000] ÷ 10 years = $1,700 Depreciation Expense 1,700 Accumulated Depreciation 1,700

On January 1 of Year 1, Whole Pine Inc. purchased a machine for $35,000. The machine is expected to have a 10-year useful life and salvage value of $1,000. Assuming that the company uses straight-line depreciation, what is included in the journal entry necessary to record depreciation expense on this machine at the end of Year 1? Debit to Depreciation Expense for $3,500 Debit to Accumulated Depreciation for $3,400 Credit to Accumulated Depreciation for $3,400 Credit to Depreciation Expense for $3,500

Credit to Accumulated Depreciation for $3,400 Depreciation Expense = [Cost - Salvage Value] ÷ Useful Life Thus, [$35,000 - $1,000] ÷ 10 years = $3,400 Depreciation Expense 3,400 Accumulated Depreciation 3,400

On April 24, Orange Zest Company declared a dividend of $2 per share to be paid on August 10 to shareholders of record on June 6. There are 10,000 shares outstanding. What is included in the journal entry necessary to record the payment of the dividends on August 10? Debit to Dividends Payable for $10,000 Debit to Cash for $20,000 Credit to Cash for $20,000 Credit to Dividends Payable for $10,000

Credit to Cash for $20,000 Dividends Payable 20,000 Cash 20,000

Whole Pine Company has issued 10,000 new common shares at a par value of $10,000 to shareholders in exchange for $200,000 cash. The shares are $1 par common shares. What is included in the journal entry necessary to record this issuance of shares? Credit to Common Stock, $1 par for $10,000 Debit to Paid-in Capital in Excess of Par for $200,000 Credit to Paid-in Capital in Excess of Par for $200,000 Debit to Common Stock, $1 par for $10,000

Credit to Common Stock, $1 par for $10,000 Cash 200,000 Common Stock, $1 par 10,000 Paid-in Capital in Excess of Par, Common 190,000

Here is the end-of-year account balance information from the accounting records of Elekix Company. Cost of Goods Sold $9,000 Accounts Payable 1,100 Capital Stock 2,000 Cash 400 Sales Revenue 10,000 Dividends 700 Retained Earnings (beginning) 1,000 Inventory 4,000 Which debit or credit would appear in the closing entries for the year? Debit to Dividends for $700 Debit to Accounts Payable for $1,100 Credit to Sales Revenue for $10,000 Credit to Cost of Goods Sold for $9,000

Credit to Cost of Goods Sold for $9,000 Sales Revenue 10,000 Retained Earnings 10,000 Retained Earnings 9,000 Cost of Goods Sold 9,000 Retained Earnings 700 Dividends 700

Oliver operates a sizeable newspaper delivery service. On the last day of each month, Oliver receives a statement from the newspaper publisher detailing how much money Oliver earned that month from delivering papers. On the 10th day of the following month, Oliver receives the cash for the preceding month's deliveries. On December 31, Oliver received a statement from the newspaper publisher notifying him that he had earned $13,700 for his December deliveries. Because December 31 is the end of Oliver's fiscal year, he makes adjusting entries at that time. Which debit or credit is correctly included in the adjusting journal entry necessary on December 31 to record the revenue that Oliver has earned but not yet received? Credit to Accounts Receivable for $13,700 Credit to Delivery Revenue for $13,700 Credit to Accounts Payable for $13,700 Debit to Delivery Revenue for $13,700

Credit to Delivery Revenue for $13,700 Accounts Receivable 13,700 Delivery Revenue 13,700

On May 29, Whole Pine Inc. declared a dividend of $1.00 per share to be paid on September 18 to shareholders of record on June 6. There are 100,000 shares outstanding. What is included in the journal entry necessary to record the declaration of the dividends on May 29? Credit to Dividends for $100,000 Debit to Dividends Payable for $100,000 Credit to Dividends Payable for $100,000 Debit to Cash for $100,000

Credit to Dividends Payable for $100,000 Dividends ($1.00 × 100,000 shares) 100,000 Dividends Payable 100,000

On March 23, Endothon Company declared a dividend of $2.00 per share to be paid on July 12 to shareholders of record on June 6. There are 10,000 shares outstanding. What is included in the journal entry necessary to record the declaration of the dividends on March 23? Credit to Dividends Payable for $20,000 Debit to Dividends Payable for $20,000 Credit to Dividends for $20,000 Debit to Cash for $20,000

Credit to Dividends Payable for $20,000 Dividends ($2.00 × 10,000 shares) 20,000 Dividends Payable 20,000

On January 1 of Year 1, a company purchased a franchise for $100,000. The franchise is expected to have a five-year economic useful life. As with almost all intangible assets, the franchise is assumed to have zero salvage value at the end of its economic useful life. Assuming that this company uses straight-line amortization, what is included in the journal entry necessary to record amortization expense on this franchise at the end of Year 1? Credit to Franchise for $100,000 Credit to Franchise for $20,000 Credit to Amortization Expense for $20,000 Credit to Amortization Expense for $100,000

Credit to Franchise for $20,000 Amortization Expense = [Cost - Salvage Value] ÷ Useful Life Thus, [$100,000 - $0] ÷ 5 years = $20,000 Amortization Expense 20,000 Franchise 20,000

On January 1 of Year 1, a company purchased a machine for $20,000. The machine was expected to have a 10-year useful life and salvage value of $2,000. The company uses straight-line depreciation. At the end of Year 4 (after depreciation expense for the year had been recorded), the machine was sold for $14,000 cash. What is included in the journal entry necessary to record the sale of this machine at the end of Year 4 for $14,000 cash? Credit to Gain for $1,200 Debit to Accumulated Depreciation for $12,800 Credit to Accumulated Depreciation for $7,200 Debit to Loss for $1,200

Credit to Gain for $1,200 Depreciation Expense = [Cost - Salvage Value] ÷ Useful Life Thus, [$20,000 - $2,000] ÷ 10 years = $1,800 After 4 years, Accumulated Depreciation = 4 × $1,800 = $7,200 $20,000 (Cost) - 7,200 (Accumulated Depreciation) = $12,800 (Book Value) Cash 14,000 Accumulated Depreciation 7,200 Gain on Sale of Machine 1,200 Machine 20,000

On October 1 of Year 1, Quiet Flag Industries made a $50,000 cash loan to another company. The interest rate on the loan is 13 percent. No cash payments will be collected on the loan until September 30 of Year 2. Which debit or credit is correctly included in the adjusting journal entry necessary on Quiet Flag's books (the lender) on December 31 with respect to this loan? Debit to Interest Revenue for $1,625 Credit to Interest Revenue for $1,625 Debit to Interest Revenue for $4,875 Credit to Interest Revenue for $4,875

Credit to Interest Revenue for $1,625 (Year 1 interest amount: $50,000 × 0.13 × (3÷12) = $1,625) Interest Receivable 1,625 Interest Revenue 1,625

On November 1, Endothon Company purchased inventory costing $1,000 on account. The payment terms are 2/10, n/30. Endothon paid on November 6 in order to receive the 2% discount. Assuming Endothon Company uses a perpetual inventory system, which debit or credit is included in the journal entry necessary to record the cash payment of this account within the discount period? Credit to Inventory for $1,000 Credit to Purchase Discounts for $20 Credit to Inventory for $20 Credit to Accounts Payable for $1,000

Credit to Inventory for $20 Perpetual System Accounts Payable 1,000 Inventory 20 Cash 980 Periodic System Accounts Payable 1,000 Purchase Discounts 20 Cash 980

The chief operating officer (COO) of a company has become concerned that employees are stealing office supplies from the company. Last year, the COO quietly installed a system that tracks the authorized use of supplies by employees. According to this system, the office supplies used last year in authorized activities were $7,000. The COO plans to compare this $7,000 number to the Supplies Expense number computed in the usual way, using the bookkeeping records. If the computed Supplies Expense number is substantially greater than the $7,000 number obtained from the COO's system, then there is evidence that the employees have indeed been stealing office supplies. On January 1, the company had office supplies costing $4,600. During the year, the company bought (and recorded) additional office supplies costing $8,200. On December 31, a physical count of office supplies revealed that supplies costing $2,900 remained. Which debit or credit is correctly included in the adjusting journal entry necessary on December 31 to record the supplies that this company used during the year? Credit to Office Supplies Expense for $9,900 Debit to Office Supplies for $9,900 Credit to Office Supplies for $9,900 Credit to Cash for $9,900

Credit to Office Supplies for $9,900 The following is the correct adjusting journal entry: Office Supplies Expense 9,900 Office Supplies 9,900 $4,600 beginning + $8,200 purchased = $12,800 supplies available $12,800 supplies available - $2,900 remaining = $9,900 supplies used

Paradigm Toys has issued 100,000 new shares to shareholders in exchange for $2,000,000 cash. The shares are $1 par common shares. What is included in the journal entry necessary to record this issuance of shares? Debit to Common Stock, $1 par for $2,000,000 Debit to Paid-in Capital in Excess of Par for $1,900,000 Credit to Common Stock, $1 par for $2,000,000 Credit to Paid-in Capital in Excess of Par for $1,900,000

Credit to Paid-in Capital in Excess of Par for $1,900,000 Cash 2,000,000 Common Stock, $1 par 100,000 Paid-in Capital in Excess of Par, Common 1,900,000

A company has issued 100,000 new shares to shareholders in exchange for $3,000,000 cash. The shares are $10 par preferred shares. What is included in the journal entry necessary to record this issuance of shares? Debit to Paid-In Capital in Excess of Par for $2,000,000 Credit to Preferred Stock, $10 par for $1,000,000 Credit to Paid-In Capital in Excess of Par for $1,000,000 Debit to Preferred Stock, $10 par for $2,000,000

Credit to Preferred Stock, $10 par for $1,000,000 Cash 3,000,000 Preferred Stock, $10 Par 1,000,000 Paid-In Capital in Excess of Par, Preferred 2,000,000

A company has issued 100,000 new shares to shareholders in exchange for $2,000,000 cash. The shares are $5 par preferred shares. What is included in the journal entry necessary to record this issuance of shares? Debit to Paid-In Capital in Excess of Par for $1,500,000 Debit to Preferred Stock, $5 par for $500,000 Credit to Paid-In Capital in Excess of Par for $2,000,000 Credit to Preferred Stock, $5 par for $500,000

Credit to Preferred Stock, $5 par for $500,000 Cash 2,000,000 Preferred Stock, $5 par 500,000 Paid-In Capital in Excess of Par, Preferred 1,500,000

On November 1, Whole Pine Inc. purchased inventory costing $1,000 on account. The payment terms are 2/10, n/30. Whole Pine Inc. paid on November 6 in order to receive the 2% discount. Assume that Whole Pine Inc. uses a periodic inventory system. Which debit or credit is included in the journal entry necessary to record the cash payment of this account within the discount period? Credit to Inventory for $20 Credit to Purchase Discounts for $20 Credit to Inventory for $1,000 Credit to Accounts Payable for $1,000

Credit to Purchase Discounts for $20 Periodic System Accounts Payable 1,000 Purchase Discounts 20 Cash 980 Perpetual System Accounts Payable 1,000 Inventory 20 Cash 980

Freedom Rock Bicycles purchased inventory on account for $7,000. The inventory inspector at Freedom Rock Bicycles did not approve of the quality of the inventory, and so returned it. Of course, Freedom Rock Bicycles now does not have to pay for the inventory. Assuming that Freedom Rock Bicycles uses a periodic inventory system, which debit or credit is included in the journal entry necessary to record the return of this inventory? Credit to Freight In for $7,000 Credit to Purchase Returns for $7,000 Credit to Accounts Payable for $7,000 Credit to Inventory for $7,000

Credit to Purchase Returns for $7,000 Periodic System Accounts Payable 7,000 Purchase Returns 7,000 Perpetual System Accounts Payable 7,000 Inventory 7,000

Alliah Company purchased inventory on account for $7,000. The inventory inspector at Alliah did not approve of the quality of the inventory and so returned it. Of course, Alliah now does not have to pay for the inventory. Assuming Alliah Company uses a perpetual inventory system, which debit or credit is included in the journal entry necessary to record the return of this inventory? Credit to Purchase Returns for $7,000 Credit to Freight In for $7,000 Credit to Accounts Payable for $7,000 Credit to Inventory for $7,000

Credit to Purchase Returns for $7,000 Perpetual System Accounts Payable 7,000 Inventory 7,000 Periodic System Accounts Payable 7,000 Purchase Returns 7,000

On September 1 of Year 1, the company received $3,600 cash for rent in advance. This $3,600 rental receipt covers the period from September 1 of Year 1 to August 31 of Year 2. On September 1, the receipt of the cash was recorded as a liability. Which debit or credit is correctly included in the adjusting journal entry necessary on December 31 with respect to this rent received in advance? Debit to Rent Revenue for $2,400 Credit to Rent Revenue for $2,400 Credit to Rent Revenue for $1,200 Debit to Rent Revenue for $1,200

Credit to Rent Revenue for $1,200 Unearned Rent 1,200 Rent Revenue 1,200

Here are the payroll data for the employees of Strime Company: Federal Withholding Taxes Payable $6,000 FICA Taxes Payable, Employees 3,200 State Withholding Taxes Payable 2,000 Salaries Payable 50,000 What is included in the journal entry necessary to record these employee payroll data? Credit to Salaries Expense for $50,000 Credit to Salaries Expense for $61,200 Credit to Salaries Payable for $61,200 Credit to Salaries Payable for $50,000

Credit to Salaries Payable for $50,000 Salaries Expense 61,200 Salaries Payable 50,000 State Withholding Taxes Payable 2,000 Federal Withholding Taxes Payable 6,000 FICA Taxes Payable, Employees 3,200

Here are payroll data for the employees of Paradigm Toys: Federal Withholding Taxes Payable $75,000 Salaries Payable 600,000 FICA Taxes Payable, Employees 39,000 State Withholding Taxes Payable 24,000 What is included in the journal entry necessary to record these employees' payroll data? Credit to Salaries Payable for $600,000 Debit to Salary Expense for $600,000 Debit to Salaries Payable for $600,000 Credit to Salary Expense for $600,000

Credit to Salaries Payable for $600,000 Salaries Expense 738,000 State Withholding Taxes Payable 24,000 Federal Withholding Taxes Payable 75,000 FICA Taxes Payable, Employees 39,000 Salaries Payable 600,000

An employee of a company earns a salary of $300 per day. In addition, for every 10 days that she works, she earns the right to take a paid sick day at some point in the future. Ignoring any payroll taxes and assuming that this employee's salary has not yet been paid, what is included in the journal entry necessary to record her salary for the most recent pay period, which involved her using 25 sick days? Credit to Salaries Expense for $7,500 Credit to Salaries Payable for $7,500 Debit to Sick Days Payable for $300 Debit to Salaries Expense for $300

Credit to Salaries Payable for $7,500 Sick Days Payable (25 × $300) 7,500 Salaries Payable (25 × $300) 7,500

Freedom Rock Bicycles made retail sales of $1,000 to its customers. The sales tax rate is 6.0%. All sales are cash sales. What is included in the journal entry necessary to record these sales? Debit to Sales Revenue for $1,000 Debit to Sales Revenue for $1,060 Credit to Sales Revenue for $1,060 Credit to Sales Revenue for $1,000

Credit to Sales Revenue for $1,000 Cash ($1,000 × 1.06) 1,060 Sales Revenue 1,000 Sales Tax Payable ($1,000 × 0.06) 60

Jaunty Coffee Co. made retail sales of $100,000 to its customers. The sales tax rate is 7.00%. All sales are cash sales. What is included in the journal entry necessary to record these sales? Credit to Sales Tax Payable for $107,000 Credit to Sales Revenue for $100,000 Debit to Sales Revenue for $100,000 Debit to Sales Tax Payable for $107,000

Credit to Sales Revenue for $100,000 Cash ($100,000 × 1.07) 107,000 Sales Revenue 100,000 Sales Tax Payable ($100,000 × 0.07) 7,000

Sparkit Company made retail sales of $10,000 to its customers. The sales tax rate is 6.50 percent. All sales are cash sales. What is included in the journal entry necessary to record these sales? Credit to Sales Tax Payable for $650 Debit to Sales Revenue for $10,650 Debit to Sales Tax Payable for $650 Credit to Sales Revenue for $10,650

Credit to Sales Tax Payable for $650 Cash ($10,000 × 1.065) 10,650 Sales Revenue 10,000 Sales Tax Payable ($10,000 × 0.065) 650

On October 1, a company received $2,400 in advance for 12 months of service to be provided, with the service period beginning on October 1. This $2,400 was recorded as Unearned Service Revenue. The service is provided evenly throughout the year. As of the end of the year, no entry has yet been made to adjust the amount initially recorded. Which debit or credit is correctly included in the adjusting journal entry necessary on December 31? Credit to Unearned Service Revenue for 600 Credit to Service Revenue for 600 Debit to Unearned Service Revenue for 1,800 Debit to Service Revenue for 1,800

Credit to Service Revenue for 600 (Revenue: ($2,400 ÷ 12 months) × 3 months = $600) Unearned Service Revenue 600 Service Revenue 600

Eva is an employee of Alliah Company. Eva earns a salary of $400 per day. In addition, for every five days that she works, Eva earns the right to take a paid sick day at some point in the future. Ignoring any payroll taxes and assuming that Eva's salary has not yet been paid in cash, what is included in the journal entry necessary to record Eva's salary for the most recent pay period, which involved 25 working days? Debit to Sick Days Payable for $2,000 Credit to Sick Days Payable for $2,000 Credit to Salaries Expense for $12,000 Debit to Salaries Payable for $12,000

Credit to Sick Days Payable for $2,000 Salaries Expense 12,000 Sick Days Payable (5 × $400) 2,000 Salaries Payable (25 × $400) 10,000

Here are payroll tax data related to the employees of a company: Federal Unemployment Taxes Payable $8,000 FICA Taxes Payable, Employer 64,000 State Unemployment Taxes Payable 40,000 What is included in the journal entry necessary to record these payroll tax data? Credit to State Unemployment Taxes Payable for $40,000 Debit to Payroll Tax Expense for $64,000 Debit to FICA Taxes Payable, Employer for $64,000 Credit to Payroll Tax Expense for $40,000

Credit to State Unemployment Taxes Payable for $40,000 Payroll Tax Expense 112,000 State Unemployment Taxes Payable 40,000 Federal Unemployment Taxes Payable 8,000 FICA Taxes Payable, Employer 64,000

On January 1 of Year 1, Corollary Company purchased a trademark for $20,000. The trademark is expected to have a 10-year economic useful life. As with almost all intangible assets, the trademark is assumed to have zero salvage value at the end of its economic useful life. Assuming that the company uses straight-line amortization, what is included in the journal entry necessary to record amortization expense on this trademark at the end of Year 1? Credit to Trademark for $20,000 Credit to Amortization Expense for $2,000 Credit to Amortization Expense for $20,000 Credit to Trademark for $2,000

Credit to Trademark for $2,000 Amortization expense = [Cost - Salvage Value] ÷ Useful Life Thus, [$20,000 - $0] ÷ 10 years = $2,000 Amortization Expense 2,000 Trademark 2,000

On September 1 of Year 1, the company received $3,600 cash for rent in advance. This $3,600 rental receipt covers the period from September 1 of Year 1 to August 31 of Year 2. Assuming that this is not an adjusting journal entry, which debit or credit is correctly included in the journal entry necessary to record this cash received for rent in advance? Credit to Rent Revenue for $3,600 Credit to Unearned Rent for $3,600 Debit to Unearned Rent for $3,600 Debit to Rent Revenue for $3,600

Credit to Unearned Rent for $3,600 Cash 3,600 Unearned Rent 3,600

A company pays its employees once each month, on the 10th day of the month following the month in which the wages were earned. Total employee wages earned, but not yet paid, on December 31, totaling $10,000. Which debit or credit is correctly included in the adjusting journal entry necessary on December 31 to record the wages that this company has not yet paid? Credit to Cash for $10,000 Credit to Wages Payable for $10,000 Credit to Wages Expense for $10,000 Debit to Cash for $10,000

Credit to Wages Payable for $10,000 Wages Expense 10,000 Wages Payable 10,000

Strime Company collected cash of $1,300 on account for credit sales previously recorded. Which entry is included in the journal entry necessary to record this cash collection on account? Credit to accounts payable for $1,300 Credit to accounts receivable for $1,300 Debits to accounts receivable for $1,300 Debit to accounts payable for $1,300

Credit to accounts receivable for $1,300 Cash 1,300 Accounts Receivable 1,300

A company borrowed $10,000 cash from the local bank. What is included in the journal entry necessary to record this cash borrowing? Debit to retained earnings for $10,000 Credit to cash for $10,000 Debit to loans payable for $10,000 Credit to loans payable for $10,000

Credit to loans payable for $10,000 Cash 10,000 Loans Payable 10,000

Quality Apply Farms received $3,500 cash for services that it will provide next year. What is included in the journal entry necessary to record this collection of cash in advance? Credit to cash for $3,500 Credit to unearned service revenue for $3,500 Credit to accounts receivable for $3,500 Credit to retained earnings for $3,500

Credit to unearned service revenue for $3,500 Cash 3,500 Unearned Service Revenue 3,500

Which Excel spreadsheet tool is used to create a drop-down list in a cell? Table Filter Consolidation Data Validation

Data Validation

On January 16, a credit sale was made for $600. Terms for the sale were 4/20, n/60. Cash for the sale was collected on January 28. What debit or credit should be included in the journal entry to record the sale on January 16? Debit Sales Discounts for $576. Credit Sales Discounts for $24. Credit Cash for $576. Debit Accounts Receivable for $600.

Debit Accounts Receivable for $600. January 16 Accounts Receivable 600 Sales 600

During the year, Kretsmart Company wrote off accounts in the amount of $20,000 as being uncollectible. Which debit or credit is included in the summary journal entry to record the write-off of uncollectible accounts during the year? Credit Bad Debt Expense for $20,000 Debit Allowance for Bad Debts for $20,000 Credit Allowance for Bad Debts for $20,000 Debit Bad Debt Expense for $20,000

Debit Allowance for Bad Debts for $20,000 Allowance for Bad Debts 20,000 Accounts Receivable 20,000

Wild Parsley Grill estimated bad debt expense for the year to be $7,300. Total accounts written off as uncollectible during the year were $7,000. Which debit or credit is included in the summary journal entry to record the write-off of uncollectible accounts during the year? Debit Bad Debt Expense for $7,000 Debit Allowance for Bad Debts for $7,000 Credit Allowance for Bad Debts for $7,000 Credit Bad Debt Expense for $7,000

Debit Allowance for Bad Debts for $7,000 Allowance for Bad Debts 7,000 Accounts Receivable 7,000

Endothon Company estimated bad debt expense for the year to be $7,000. Total accounts written off as uncollectible during the year were $7,300. Which debit or credit is included in the summary journal entry to record the write-off of uncollectible accounts during the year? Credit Bad Debt Expense for $7,300 Debit Bad Debt Expense for $7,300 Debit Allowance for Bad Debts for $7,300 Credit Allowance for Bad Debts for $7,300

Debit Allowance for Bad Debts for $7,300 Allowance for Bad Debts 7,300 Accounts Receivable 7,300

Kretsmart Company uses the allowance method to account for bad debts, which it has estimated to be $10,000 for the year. Total accounts written off as uncollectible during the year were $8,000. At year end, which debit or credit is included in the summary journal entry to record the write-off of uncollectible accounts during the year? Credit Allowance for Bad Debts for $8,000. Credit Bad Debt Expense for $10,000. Debit Allowance for Bad Debts for $8,000. Debit Bad Debt Expense for $10,000.

Debit Allowance for Bad Debts for $8,000. Allowance for Bad Debts 8,000 Accounts Receivable 8,000

Paradigm Toys estimated Bad Debt Expense for the year to be $10,000. Which debit or credit is included in the adjusting entry to record Bad Debt Expense for the year? Debit Bad Debt Expense for $10,000 Credit Accounts Receivable for $10,000 Debit Allowance for Bad Debts for $10,000 Credit Cash for $10,000

Debit Bad Debt Expense for $10,000 Bad Debt Expense 10,000 Allowance for Bad Debts 10,000

Bullzai Company estimated bad debt expense for the year to be $100,000. Which debit or credit is included in the adjusting entry to record bad debt expense for the year? Debit Bad Debt Expense for $100,000 Credit Bad Debt Expense for $100,000 Debit Allowance for Bad Debts for $100,000 Credit Accounts Receivable for $100,000

Debit Bad Debt Expense for $100,000 Bad Debt Expense 100,000 Allowance for Bad Debts 100,000

Orange Zest Company estimated Bad Debt Expense using the percentage of accounts receivable method. Total sales for the year were $500,000. The ending balance in Accounts Receivable was $100,000. An examination of the outstanding accounts at the end of the year indicates that approximately 12% of these accounts will ultimately prove to be uncollectible. Before any adjustment, the balance in the Allowance for Bad Debts is $700 (debit). Total accounts written off as uncollectible during the year were $14,700. Which debit or credit is included in the adjusting entry to record Bad Debt Expense for the year? Credit Bad Debt Expense for $11,300. Debit Bad Debt Expense for $11,300 Credit Bad Debt Expense for $12,700 Debit Bad Debt Expense for $12,700

Debit Bad Debt Expense for $12,700 Bad Debt Expense 12,700 Allowance for Bad Debts 12,700 $100,000 × 0.12 = $12,000 Thus, $12,000 + $700 = $12,700

Paradigm Toys estimated bad debt expense using the percentage of accounts receivable method. Total sales for the year were $500,000. The ending balance in Accounts Receivable was $100,000. An examination of the outstanding accounts at the end of the year indicates that approximately 5% of these accounts will ultimately prove to be uncollectible. Before any adjustment, the balance in the Allowance for Bad Debts is $1,100 (credit). Total accounts written off as uncollectible during the year were $4,700. Which debit or credit is included in the adjusting entry to record bad debt expense for this year? Credit Bad Debt Expense for $3,900 Debit Bad Debt Expense for $3,900 Credit Bad Debt Expense for $5,000 Debit Bad Debt Expense for $5,000

Debit Bad Debt Expense for $3,900 Bad Debt Expense 3,900 Allowance for Bad Debts 3,900

On January 16, a credit sale was made for $300. Terms for the sale were 4/10, n/30. Cash for the sale was collected on February 1. What debit or credit should be included in the journal entry to record the cash collection on February 1? Credit Sales Discounts for $12 Debit Sales Discounts for $12 Debit Cash for $300 Credit Accounts Receivable for $288

Debit Cash for $300 January 16 Accounts Receivable 300 Sales 300 February 1 (Payment was not received within a 10-day discount period.) Cash 300 Accounts Receivable 300

On January 16, Whole Pine Inc. made a credit sale to Lucas for $400. Terms for the sale were 2/15, n/30. After speaking with Daniel, Lucas paid cash on January 22. Which debit or credit should be included in the journal entry to record the cash collection on January 22? Debit Sales Discounts for $60 Credit Accounts Receivable for $392 Credit Sales Discounts for $8 Debit Cash for $392

Debit Cash for $392 The journal entry to record the credit sale on January 16 is shown as follows: January 16 Accounts Receivable 400 Sales 400 The journal entry to record the cash collection on January 22 is shown as follows: January 22 Cash ($400 x 0.98) 392 Sales Discount 8 Accounts Receivable 400

On January 16, a credit sale was made for $200. Terms for the sale were 3/15, n/30. Cash for the sale was collected on January 25. Which debit or credit should be included in the journal entry to record the cash collection on January 25? Credit Sales Discounts for $6 Debit Cash for $200 Credit Accounts Receivable for $194 Debit Sales Discounts for $6

Debit Sales Discounts for $6 January 16 Accounts Receivable 200 Sales 200 January 25 Cash ($200 × 0.97) 194 Sales Discounts 6 Accounts Receivable 200

On July 15, goods were sold for $10,000 on account. The customer returned the goods before paying for them. Which debit or credit should be included in the journal entry on the books of the seller to record the return of the goods? Credit Cash for $10,000 Credit Sales Returns and Allowances for $10,000 Debit Accounts Receivable for $10,000 Debit Sales Returns and Allowances for $10,000

Debit Sales Returns and Allowances for $10,000 Sales Returns and Allowances 10,000 Accounts Receivable 10,000

On March 23, goods were sold for $20,000 cash. A week later, the dissatisfied customer returned the goods. What debit or credit should be included in the journal entry on the books of the seller to record the return of the goods? Debit Accounts Receivable for $20,000. Credit Accounts Receivable for $20,000. Credit Sales Returns and Allowances for $20,000. Debit Sales Returns and Allowances for $20,000.

Debit Sales Returns and Allowances for $20,000. Sales Returns and Allowances 20,000 Cash 20,000

How are the items arranged in a journal entry? Debit indented to the right Debits and credits aligned in the same column Debit first, credit second Credit first, debit second

Debit first, credit second

On January 1 of Year 1, Bullzai Company purchased a machine for $10,000. The machine was expected to have a 10-year useful life and salvage value of $2,000. The company uses straight-line depreciation. At the end of Year 3 (after depreciation expense for the year had been recorded), the machine was sold for $7,000 cash. What is included in the journal entry necessary to record the sale of this machine at the end of Year 3 for $7,000 cash? Debit to Accumulated Depreciation for $2,400 Credit to Loss for $600 Debit to Accumulated Depreciation for $7,600 Credit to Machine for $7,600

Debit to Accumulated Depreciation for $2,400 The journal entry for the sale of the machine at the end of Year 3 is as follows: Depreciation expense = [Cost - Salvage Value] ÷ Useful Life Thus, [$10,000 - $2,000] ÷ 10 years = $800 After 3 years, Accumulated Depreciation = 3 × $800 = $2,400 $10,000 (Cost) - $2,400 (Accumulated Depreciation) = $7,600 (Book Value) Cash 7,000 Accumulated Depreciation 2,400 Loss on Sale of Machine 600 Machine 10,000

On January 1 of Year 1, a company purchased a machine for $10,000. The machine was expected to have a five-year useful life and salvage value of $3,000. The company uses straight-line depreciation. At the end of Year 3 (after depreciation expense for the year had been recorded), the machine was sold for $7,000 cash. What is included in the journal entry necessary to record the sale of this machine at the end of Year 3 for $7,000 cash? Credit to Accumulated Depreciation for $4,200 Credit to Loss for $1,200 Debit to Accumulated Depreciation for $4,200 Debit to Gain for $1,200

Debit to Accumulated Depreciation for $4,200 Depreciation Expense = [Cost - Salvage Value] ÷ Useful Life Thus, [$10,000 - $3,000] ÷ 5 years = $1,400 After 3 years, Accumulated Depreciation = 3 × $1,400 = $4,200 $10,000 (Cost) - 4,200 (Accumulated Depreciation) = $5,800 (Book Value) Cash 7,000 Accumulated Depreciation 4,200 Gain on Sale of Machine 1,200 Machine 10,000

On January 1 of Year 1, Orange Zest Company purchased a machine for $10,000. The machine was expected to have a 5-year useful life and salvage value of $2,000. The company uses straight-line depreciation. At the end of Year 3 (after depreciation expense for the year had been recorded), the machine was sold for $7,000 cash. What is included in the journal entry necessary to record the sale of this machine at the end of Year 3 for $7,000 cash? Debit to Accumulated Depreciation for $4,800 Debit to Machine for $5,200 Debit to Gain for $1,800 Debit to Accumulated Depreciation for $5,200

Debit to Accumulated Depreciation for $4,800 $10,000 - $2,000] ÷ 5 years = $1,600 After 3 years, Accumulated Depreciation = 3 × $1,600 = $4,800 $10,000 (Cost) - $4,800 (Accumulated Depreciation) = $52,000 (Book Value) Cash 7,000 Accumulated Depreciation 4,800 Gain on Sale of Machine 1,800 Machine 10,000

On January 1 of Year 1, a company purchased a patent for $36,000. The patent had an original legal life of 20 years, but only 12 years remain. The patent is expected to have continued economic value during these 12 years. As with almost all intangible assets, the patent is assumed to have zero salvage value at the end of its economic useful life. Assuming that the company uses straight-line amortization, what is included in the journal entry necessary to record amortization expense on this patent at the end of Year 1? Debit to Amortization Expense for $3,000 Debit to Patent for $3,000 Debit to Amortization Expense for $1,800 Debit to Patent for $1,800

Debit to Amortization Expense for $3,000 Amortization Expense = [Cost - Salvage Value] ÷ Useful Life Thus, [$36,000 - $0] ÷ 12 years = $3,000 Amortization Expense 3,000 Patent 3,000

On January 1 of Year 1, Whole Pine Company purchased a patent for $20,000. The patent had an original legal life of 20 years, but only 5 years remain. The patent is expected to have continued economic value during these 5 years. As with almost all intangible assets, the patent is assumed to have zero salvage value at the end of its economic useful life. Assuming the company uses straight-line amortization, what is included in the journal entry necessary to record amortization expense on this patent at the end of Year 1? Debit to Patent for $1,000 Debit to Amortization Expense for $1,000 Debit to Patent for $4,000 Debit to Amortization Expense for $4,000

Debit to Amortization Expense for $4,000 Amortization expense = [Cost - Salvage Value] ÷ Useful Life [$20,000 - $0] ÷ 5 years = $4,000 Amortization Expense 4,000 Patent 4,000

On January 1 of Year 1, a company purchased a machine for $30,000. The machine is expected to have a five-year useful life and salvage value of $5,000. Assuming that this company uses straight-line depreciation, what is included in the journal entry necessary to record depreciation expense on this machine at the end of Year 1? Debit to Accumulated Depreciation for $5,000 Debit to Accumulated Depreciation for $6,000 Debit to Depreciation Expense for $5,000 Debit to Depreciation Expense for $6,000

Debit to Depreciation Expense for $5,000 Depreciation Expense = [Cost - Salvage Value] ÷ Useful Life Thus, [$30,000 - $5,000] ÷ 5 years = $5,000 Depreciation Expense 5,000 Accumulated Depreciation 5,000

On January 1 of Year 1, Corollary Company purchased a machine for $10,000. The machine is expected to have a 10-year useful life and salvage value of $1,000. Assuming that the company uses straight-line depreciation, what is included in the journal entry necessary to record depreciation expense on this machine at the end of Year 1? Debit to Depreciation Expense for $900 Debit to Machine for $900 Debit to Accumulated Depreciation for $1,000 Debit to Depreciation Expense for $1,000

Debit to Depreciation Expense for $900 Depreciation Expense = [Cost - Salvage Value] ÷ Useful Life. Thus, [$10,000 - $1,000] ÷ 10 years = $900 Depreciation Expense 900 Accumulated Depreciation 900

On March 23, Corollary Company declared a dividend of $4 per share to be paid on July 12 to shareholders of record on June 6. There are 50,000 shares outstanding. What is included in the journal entry necessary to record the declaration of the dividends on March 23? Debit to Dividends Payable for $200,000 Debit to Dividends for $200,000 Credit to Dividends for $200,000 Debit to Cash for $200,000

Debit to Dividends for $200,000 Dividends ($4.00 × 50,000 shares) 200,000 Dividends Payable 200,000

On March 23, Whole Pine Inc. declared a dividend of $2.50 per share to be paid on July 12 to shareholders of record on June 6. There are 100,000 shares outstanding. What is included in the journal entry necessary to record the declaration of the dividends on March 23? Debit to Dividends for $250,000 Credit to Dividends for $250,000 Credit to Cash for $250,000 Debit to Cash for $250,000

Debit to Dividends for $250,000 Dividends ($2.50 × 100,000 shares) 250,000 Dividends Payable 250,000

Pruhart Company purchased franchise rights from another company for $100,000. Pruhart paid $35,000 cash and signed a note payable agreeing to pay the remaining $65,000 in the future. What is included in the journal entry necessary to record this franchise purchase? Debit to Franchise for $35,000 Credit to Franchise for $35,000 Credit to Franchise for $65,000 Debit to Franchise for $100,000

Debit to Franchise for $100,000 Franchise 100,000 Cash 35,000 Notes Payable 65,000

Ridgeland Company uses a periodic inventory system. The company recently purchased inventory and the shipping costs were not included in the cost of inventory, so Ridgeland has to pay the shipping costs separately in cash. The shipping costs are $500. Which debit or credit is included in the journal entry necessary to record the cash payment of these shipping costs? Debit to Inventory for $500 Debit to Accounts Payable for $500 Debit to Transportation Expense for $500 Debit to Freight In for $500

Debit to Freight In for $500 Periodic System Freight In 500 Cash 500 Perpetual System Inventory 500 Cash 500

On September 1 of Year 1, Endothon Company paid $36,000 cash for insurance. This $36,000 insurance payment covers the period from September 1 of Year 1 to August 31 of Year 2. On September 1, the payment of the cash was recorded as an asset as prepaid insurance. Which debit or credit is correctly included in the adjusting journal entry necessary on December 31 with respect to this prepaid insurance? Credit to Insurance Expense for $12,000 Debit to Insurance Expense for $12,000 Credit to Insurance Expense for $24,000 Debit to Insurance Expense for $24,000

Debit to Insurance Expense for $12,000 (Expense amount: ($36,000 ÷ 12 months) × 4 months = $12,000) *The correct adjusting journal entry is shown as follows: Insurance Expense 12,000 Prepaid Insurance 12,000

On September 1 of Year 1, a company paid $2,400 cash for insurance. This $2,400 insurance payment covers the period from September 1 of Year 1 to August 31 of Year 2. On September 1, the payment of the cash was recorded as an asset, Prepaid Insurance. Which debit or credit is correctly included in the adjusting journal entry necessary on December 31 with respect to this Prepaid Insurance? Debit to Insurance Expense for $800 Credit to Insurance Expense for $1,600 Credit to Insurance Expense for $800 Debit to Insurance Expense for $1,600

Debit to Insurance Expense for $800 (Expense Amount: ($2,400 ÷ 12 months) × 4 months = $800) Insurance Expense 800 Prepaid Insurance 800

On November 1, a company borrowed $100,000 under a one-year loan agreement. The annual interest rate is 6%. As of the end of the year, no entry has yet been made to record the accrued interest on the loan. Which debit or credit is correctly included in the adjusting journal entry necessary on December 31 to record the unpaid interest? Debit to Interest Expense for $1,000 Credit to Interest Payable for $5,000 Credit to Interest Expense for $1,000 Debit to Interest Payable for $1,000

Debit to Interest Expense for $1,000 ($100,000 × 0.06 × 2 ÷ 12 = $1,000) Interest Expense 1,000 Interest Payable 1,000

A company has a long-term loan on which it is making annual payments of $30,000. This year, the $30,000 payment is composed of $18,000 in interest and $12,000 that actually goes toward repaying the loan. What is included in the journal entry necessary to record this $30,000 cash loan payment? Debit to Interest Expense for $18,000 Debit to Interest Expense for $12,000 Credit to Loan Payable for $12,000 Credit to Loan Payable for $18,000

Debit to Interest Expense for $18,000 Loan Payable 12,000 Interest Expense 18,000 Cash 30,000

Dellberg Company has a long-term loan on which it is making annual payments of $50,000. This year, the $50,000 payment is composed of $41,000 in interest and $9,000 that actually goes toward repaying the loan. What is included in the journal entry necessary to record this $50,000 cash loan payment? Credit to Loan Payable for $50,000 Debit to Loan Payable for $50,000 Debit to Interest Expense for $41,000 Credit to Interest Expense for $41,000

Debit to Interest Expense for $41,000 Loan Payable 9,000 Interest Expense 41,000 Cash 50,000

On February 1 of Year 1, Sparkit Company received $100,000 cash from a one-year bank loan. The interest rate on the loan is 8 percent. No payments are due on the loan until January 31 of Year 2. Which debit or credit is correctly included in the adjusting journal entry necessary on December 31 with respect to this loan? Debit to Interest Expense for $7,333 Credit to Interest Expense for $8,000 Debit to Interest Payable for $7,333 Credit to Interest Payable for $8,000

Debit to Interest Expense for $7,333 Interest Expense 7,333 Interest Payable 7,333

Kretsmart Company purchased inventory. The shipping costs were not included in the cost of inventory, so Kretsmart has to pay the shipping costs separately in cash. The shipping costs are $500. Assuming that Kretsmart Company uses a perpetual inventory system, which debit or credit is included in the journal entry necessary to record the cash payment of these shipping costs? Debit to Transportation Expense for $500 Debit to Freight in for $500 Debit to Accounts Payable for $500 Debit to Inventory for $500

Debit to Inventory for $500 Perpetual System Inventory 500 Cash 500 Periodic System Freight In 500 Cash 500

Merrilton Company purchased inventory on account for $7,000. Merrilton Company uses a perpetual inventory system. Which debit or credit is included in the journal entry necessary to record the purchase of inventory on account? Debit to Inventory for $7,000 Debit to Cash for $7,000 Debit to Accounts Payable for $7,000 Debit to Purchases for $7,000

Debit to Inventory for $7,000 Periodic System Purchases 7,000 Accounts Payable 7,000 Perpetual System Inventory 7,000 Accounts Payable 7,000

A company has a long-term loan on which it is making annual payments of $30,000. This year, the $30,000 payment is composed of $5,000 in interest and $25,000 that actually goes toward repaying the loan. What is included in the journal entry necessary to record this $30,000 cash loan payment? Credit to Loan Payable for $30,000 Debit to Loan Payable for $30,000 Debit to Loan Payable for $25,000 Credit to Loan Payable for $25,000

Debit to Loan Payable for $25,000 Loan Payable 25,000 Interest Expense 5,000 Cash 30,000

Quiet Flag Industries has a long-term loan on which it is making annual payments of $10,000. This year, the $10,000 payment is composed of $6,000 in interest and $4,000 that actually goes toward repaying the loan. What is included in the journal entry necessary to record this $10,000 cash loan payment? Credit to Loan Payable for $4,000 Debit to Interest Expense for $4,000 Debit to Loan Payable for $4,000! Credit to Interest Expense for $6,000

Debit to Loan Payable for $4,000 Loans Payable 4,000 Interest Expense 6,000 Cash 10,000

On January 1 of Year 1, a company purchased a machine for $10,000. The machine was expected to have a five-year useful life and salvage value of $3,000. The company uses straight-line depreciation. At the end of Year 3 (after depreciation expense for the year had been recorded), the machine was sold for $4,000 cash. What is included in the journal entry necessary to record the sale of this machine at the end of Year 3 for $4,000 cash? Debit to Accumulated Depreciation for $5,800 Credit to Loss for $1,800 Debit to Loss for $1,800 Credit to Accumulated Depreciation for $4,200

Debit to Loss for $1,800 Depreciation Expense = [Cost - Salvage Value] ÷ Useful Life Thus, [$10,000 - $3,000] ÷ 5 years = $1,400 After 3 years, Accumulated Depreciation = 3 × $1,400 = $4,200 $10,000 (Cost) - 4,200 (Accumulated Depreciation) = $5,800 (Book Value) Cash 4,000 Accumulated Depreciation 4,200 Loss on Sale of Machine 1,800 Machine 10,000

On January 1 of Year 1, a company purchased a machine for $20,000. The machine was expected to have a 10-year useful life and salvage value of $2,000. The company uses straight-line depreciation. At the end of Year 4 (after depreciation expense for the year had been recorded), the machine was sold for $12,000 cash. What is included in the journal entry necessary to record the sale of this machine at the end of Year 4 for $12,000 cash? Debit to Accumulated Depreciation for $8,000 Credit to Accumulated Depreciation for $7,200 Debit to Loss for $800 Credit to Gain for $800

Debit to Loss for $800 Depreciation Expense = [Cost - Salvage Value] ÷ Useful Life Thus, [$20,000 - $2,000] ÷ 10 years = $1,800 After 4 years, Accumulated Depreciation = 4 × $1,800 = $7,200 $20,000 (Cost) - 7,200 (Accumulated Depreciation) = $12,800 (Book Value) Cash 12,000 Accumulated Depreciation 7,200 Loss on Sale of Machine 800 Machine 20,000

Alliah Company purchased a machine for $10,000. Alliah paid $2,000 cash and signed a note agreeing to pay the remaining $8,000 over the next five years. What is included in the journal entry necessary to record this machine purchase? Debit to Cash for $2,000 Debit to Machine for $2,000 Debit to Notes Payable for $8,000 Debit to Machine for $10,000

Debit to Machine for $10,000 Machine 10,000 Cash 2,000 Notes Payable 8,000

Orange Zest Company has a five-year, $100,000 note payable on which it has been making annual interest payments of $10,000. This is the final year of the note, and the company has made a $110,000 payment to pay this year's interest as well as to repay the note itself. What is included in the journal entry necessary to record this $110,000 cash payment? Credit to Interest Payable for $10,000 Debit to Interest Payable for $10,000 Debit to Note Payable for $100,000 Credit to Note Payable for $100,000

Debit to Note Payable for $100,000 Note Payable 100,000 Interest Expense 10,000 Cash 110,000

Dellberg Company purchased a patent from another company for $10,000 cash. What is included in the journal entry necessary to record this patent purchase? Credit to Owners' Equity for $10,000 Debit to Cash for $10,000 Credit to Patent for $10,000 Debit to Patent for $10,000

Debit to Patent for $10,000 Patent 10,000 Cash 10,000

Here are payroll data for the employees of Corollary Marketing: Federal Unemployment Taxes Payable $2,000 FICA Taxes Payable, Employer 16,000 State Unemployment Taxes Payable 10,000 What is included in the journal entry necessary to record these employees' payroll data? Credit to Payroll Tax Expense for $28,000 Debit to FICA Taxes Payable, Employer for $16,000 Credit to Federal Unemployment Taxes Payable for $12,000 Debit to Payroll Tax Expense for $28,000

Debit to Payroll Tax Expense for $28,000 Payroll Tax Expense 28,000 State Unemployment Taxes Payable 10,000 Federal Unemployment Taxes Payable 2,000 FICA Taxes Payable, Employees 16,000

Here are payroll tax data related to the employees of Whole Pine Company: Federal Unemployment Taxes Payable $ 400 FICA Taxes Payable, Employer 3,200 State Unemployment Taxes Payable 2,000 What is included in the journal entry necessary to record these payroll tax data? Debit to Payroll Tax Expense $3,600 Credit to Payroll Tax Expense for $5,600 Credit to Payroll Tax Expense for $3,600 Debit to Payroll Tax Expense for $5,600

Debit to Payroll Tax Expense for $5,600 Payroll Tax Expense 5,600 State Unemployment Taxes Payable 2,000 Federal Unemployment Taxes Payable 400 FICA Taxes Payable, Employer 3,200

On May 1 of Year 1, the company paid $2,400 cash for rent. This $2,400 rental payment covers the period from May 1 of Year 1 to April 30 of Year 2. Assuming that this is not an adjusting journal entry, which debit or credit is correctly included in the journal entry necessary to record this cash payment for rent? Debit to Retained Earnings for $2,400 Debit to Prepaid Rent for $2,400 Debit to Cash for $2,400 Debit to Accounts Receivable for $2,400

Debit to Prepaid Rent for $2,400 Prepaid Rent 2,400 Cash 2,400

Endothon Company purchased inventory on account for $3,000. Endothon Company also uses a periodic inventory system. Which debit or credit is included in the journal entry necessary to record the purchase of inventory on account? Debit to Inventory for $3,000 Debit to Cash for $3,000 Debit to Purchases for $3,000 Debit to Accounts Payable for $3,000

Debit to Purchases for $3,000 Periodic System Purchases 3,000 Accounts Payable 3,000 Perpetual System Inventory 3,000 Accounts Payable 3,000

On May 1 of Year 1, Bullzai, Inc., paid $2,400 cash for rent. This $2,400 rental payment covers the period from May 1 of Year 1 to April 30 of Year 2. On May 1, the payment of the cash was recorded as an asset as prepaid rent. Which debit or credit is correctly included in the adjusting journal entry necessary on December 31 with respect to this prepaid rent? Debit to Rent Expense for $800 Credit to Rent Expense for $1,600 Debit to Rent Expense for $1,600 Credit to Rent Expense for $800

Debit to Rent Expense for $1,600 (Expense amount: ($2,400 ÷ 12 months) × 8 months = $1,600) *Here is the correct adjusting journal entry. Rent Expenses 1,600 Prepaid Rent 1,600

On June 1, a company paid $1,200 in advance for 12 months of rent, with the rental period beginning on June 1. This $1,200 was recorded as Prepaid Rent. Which debit or credit is correctly included in the adjusting journal entry necessary on December 31? Credit to Prepaid Rent for 500 Debit to Prepaid Rent for 700 Credit to Cash for 500 Debit to Rent Expense for 700

Debit to Rent Expense for 700 (Expense: ($1,200 ÷ 12 months) × 7 months = $700) Rent Expense 700 Prepaid Rent 700

On September 1 of Year 1, a company paid $6,000 for two years' rent and recorded the entire amount as a debit to prepaid rent. Which debit or credit is correctly included in the adjusting journal entry necessary on December 31 of Year 1? Debit to Rent Expense of $1,000 Debit to Rent Expense of $3,000 Credit to Rent Expense of $2,000 Credit to Prepaid Rent of $2,000

Debit to Rent Expense of $1,000 Initial entry Sept. 1 Prepaid Rent ($250 × 24) 6,000 Cash 6,000 To record $6,000 prepayment of rent for 24 months Adjusting entry Dec. 31 Rent Expense ($250 × 4) 1,000 Prepaid Rent 1,000 To record rent expense for 4 months of year

Mateo Williams is an employee of Ridgeland Company. Mateo earns a salary of $100 per day. In addition, for every 10 days that he works, Mateo earns the right to take a paid sick day at some point in the future. Ignoring any payroll taxes and assuming that Mateo's salary has not yet been paid in cash, what is included in the journal entry necessary to record Mateo's salary for the most recent pay period, which involved 10 working days? Debit to Sick Days Payable for $100 Debit to Salaries Expense for $1,100 Credit to Salaries Expense for $1,1000 Credit to Sick Days Payable for $1,000

Debit to Salaries Expense for $1,100 Salaries Expense 1,100 Sick Days Payable (1 × $100) 100 Salaries Payable (1 × $100) 1,000

Diego Patel is an employee of Myton Company. Diego earns a salary of $200 per day. In addition, for every five days that he works, Diego earns the right to take a paid sick day at some point in the future. Ignoring any payroll taxes and assuming Patel's salary has not yet been paid in cash, what is included in the journal entry necessary to record Diego's salary for the most recent pay period, which involved 10 working days? Debit to Salaries Payable for $400 Credit to Salaries Expense for $2,400 Debit to Salaries Expense for $2,400 Credit to Salaries Payable for $400

Debit to Salaries Expense for $2,400 Salaries Expense 2,400 Sick Days Payable (2 × $200) 400 Salaries Payable (10 × $200) 2,000

Here are payroll data for the employees of Endothon Company: State Withholding Taxes Payable $6,000 Salaries Payable 100,000 Federal Withholding Taxes Payable 13,000 FICA Taxes Payable, Employees 6,500 What is included in the journal entry necessary to record these employee payroll data? Debit to Salaries Payable for $125,500 Debit to Salaries Payable for $100,000 Debit to Salary Expense for $100,000 Debit to Salary Expense for $125,500

Debit to Salary Expense for $125,500

Here are payroll data for the employees of a company: FICA Taxes Payable, Employees $13,000 State Withholding Taxes Payable 8,000 Federal Withholding Taxes Payable 25,000 Salaries Payable 200,000 What is included in the journal entry necessary to record these employees' payroll data? Credit to Salaries Payable for $246,000 Credit to Salary Expense for $246,000 Debit to Salary Expense for $246,000 Debit to Salaries Payable for $246,000

Debit to Salary Expense for $246,000 Salaries Expense 246,000 State Withholding Taxes Payable 8,000 Federal Withholding Taxes Payable 25,000 FICA Taxes Payable, Employees 13,000 Salaries Payable 200,000

Here is the end-of-year account balance information from the accounting records of Kamelon Company. Cost of Goods Sold $9,000 Accounts Payable 1,100 Capital Stock 2,000 Cash 400 Sales Revenue 10,000 Dividends 700 Retained Earnings (beginning) 1,000 Inventory 4,000 Which debit or credit would appear in the closing entries for the year? Debit to Cost of Goods Sold for $9,000 Debit to Dividends for $700 Debit to Sales Revenue for $10,000 Debit to Accounts Payable for $1,100

Debit to Sales Revenue for $10,000 Balance sheet accounts are not closed. Only nominal accounts are closed. Nominal accounts are all revenue, expense, and dividend accounts. Sales Revenue 10,000 Retained Earnings 10,000 Retained Earnings 9,000 Cost of Goods Sold 9,000 Retained Earnings 700 Dividends 700

During the month, a company made retail sales of $100,000 to its customers. The sales tax rate is 7.00%. All sales are cash sales. All of those sales were properly recorded. At the end of the month, a company sends the necessary sales tax cash amount to the government. What is included in the journal entry necessary to record the cash payment of these sales taxes to the government? Credit to Sales Revenue for $7,000 Debit to Sales Revenue for $7,000 Credit to Sales Tax Payable for $7,000 Debit to Sales Tax Payable for $7,000

Debit to Sales Tax Payable for $7,000 ($100,000 × 0.07 = 7,000) Sales Tax Payable 7,000 Cash 7,000

Jaunty Coffee Co. purchased a trademark from another company for $1,000 cash. What is included in the journal entry necessary to record this trademark purchase? Credit to Trademark for $1,000 Debit to Trademark for $1,000 Credit to Operating Expense for $1,000 Debit to Operating Expense for $1,000

Debit to Trademark for $1,000 Trademark 1,000 Cash 1,000

A company purchased a trademark from another company for $120,000. It paid $35,000 cash and signed a note payable agreeing to pay the remaining $85,000 in the future. What is included in the journal entry necessary to record this trademark purchase? Debit to Trademark for $120,000 Credit to Trademark for $85,000 Credit to Trademark for $35,000 Debit to Trademark for $35,000

Debit to Trademark for $120,000 Trademark 120,000 Cash 35,000 Notes Payable 85,000

A company has internally created a valuable trademark over the past few years. The company has decided to protect its legal rights and has registered the trademark. The cost of this registration process was $5,000, which was paid in cash. What is included in the journal entry necessary to record this trademark registration? Debit to Trademark for $5,000 Credit to Trademark for $5,000 Credit to Operating Expense for $5,000 Debit to Operating Expense for $5,000

Debit to Trademark for $5,000 Trademark 5,000 Cash 5,000

On April 1, a company received $2,400 in advance for 12 months of rent to be provided, with the rental period beginning on April 1. This company is the landlord. This $2,400 was recorded as Unearned Rent Revenue. As of the end of the year, no entry has yet been made to adjust the amount initially recorded. Which debit or credit is correctly included in the adjusting journal entry necessary on December 31? Debit to Unearned Rent Revenue for 1,800 Debit to Rent Revenue for 1,800 Credit to Unearned Rent Revenue for 600 Credit to Rent Revenue for 600

Debit to Unearned Rent Revenue for 1,800 (Revenue: ($2,400 ÷ 12 months) × 9 months = $1,800) Unearned Rent Revenue 1,800 Rent Revenue 1,800

A company pays its employees on Friday at the end of the day for work done during that five-day workweek. Total wages for a five-day workweek are $16,000. In the current year, December 31 occurred on a Tuesday, so two days of wages were earned but not paid by the end of day on December 31. Which debit or credit is correctly included in the adjusting journal entry necessary on December 31 to record the wages that this company has not yet paid? Debit to Wages Expense for $6,400 Credit to Wages Expense for $9,600 Credit to Wages Payable for $9,600 Debit to Wages Payable for $6,400

Debit to Wages Expense for $6,400 Wages Expense 6,400 Wages Payable 6,400

A company purchased a building with a market value of $100,000. Instead of paying cash for the building, the company gave 5,000 shares of its own stock to the building seller. The company's stock has a market value of $20 per share. What is included in the journal entry necessary to record this acquisition of a building in exchange for shares? Debit to building for $5,000 Credit to retained earnings for $100,000 Credit to capital stock for $5,000 Debit to building for $100,000

Debit to building for $100,000 Building $100,000 Capital Stock $100,000

A company paid cash dividends of $3,000. What is included in the journal entry necessary to record this payment of cash dividends? Debit to cash for $3,000 Debit to dividends (or retained earnings) for $3,000 Debit to operating expenses for $3,000 Debit to paid-in capital for $3,000

Debit to dividends (or retained earnings) for $3,000 Dividends (or retained earnings) 3,000 Cash 3,000

Alliah Company paid $4,100 cash for insurance coverage, which will be in effect for the next year. Which entry is included in the journal entry necessary to record this prepayment of insurance? Debit to cash for $4,100 Debit to prepaid insurance for $4,100 Debit to unearned insurance for $4,100 Debit to retained earnings for $4,100

Debit to prepaid insurance for $4,100 Prepaid Insurance 4,100 Cash 4,100

Dellberg Company paid $850 cash for its electricity bill for last month. To this point, nothing had been recorded in the books with respect to this electricity bill. Which entry is included in the journal entry necessary to record this cash payment? Debit to utilities expense for $850 Credit to accounts payable for $850 Debit to accounts payable for $850 Credit to utilities expense for $850

Debit to utilities expense for $850 Utilities Exp. 850 Cash 850

On what date does a company become legally obligated to pay a dividend? Date of record Payment date Declaration date Balance sheet date

Declaration date

What is the difference between depreciation and amortization? - Amortization is for periods of five years or less; depreciation is for periods of more than five years. - Amortization is for tangible assets; depreciation is for intangible assets. - Depreciation is for tangible assets; amortization is for intangible assets. - Depreciation is for periods of five years or less; amortization is for periods of more than five years.

Depreciation is for tangible assets; amortization is for intangible assets.

What are the characteristics of a well-designed document? - Complicated, designed with certain uses in mind, and not prenumbered; format is not important - Easily understood, designed with all uses in mind, prenumbered, and well formatted - Complicated, designed with all uses in mind, and prenumbered; format is not important - Easily understood, designed with certain uses in mind, not prenumbered, and well formatted

Easily understood, designed with all uses in mind, prenumbered, and well formatted

After the effects of every transaction are considered and recorded, what must the accounting equation do? Equal total owner's equity Equal total liabilities Equal total itself, or balance Equal total assets

Equal total itself, or balance After the effects of every transaction are considered and recorded, the accounting equation must balance.

With respect to bad debts, what is the allowance method? - Recognizing bad debt expense only when the associated sales discount is not taken - Recognizing bad debt expense after confirming that a specific customer is not going to pay - Estimating and recognizing bad debt expense only after every allowance has been made and every effort put forth to collect from a specific customer - Estimating and recognizing bad debt expense in the same period in which the associated sale takes place

Estimating and recognizing bad debt expense in the same period in which the associated sale takes place

What is the proper accounting for most costs associated with developing a patent? Deferred expense Asset Expense Revenue

Expense

An accountant for a company mistakenly posted an expense amount as an asset in the general ledger. What is the financial statement impact of this error? Expenses are too low, so reported net income is too high. Expenses are too high, so reported net income is too low. Revenues are too high, so reported net income is too high. Revenues are too low, so reported net income is too low.

Expenses are too low, so reported net income is too high. Correct! If the expense amount is reported as an asset, then the general ledger contains too many assets and an incorrectly low amount of expenses. If expenses are mistakenly reported as being low, then the reported net income is too high.

How does the time period concept impact the process of financial reporting? - Financial statements are not provided until the owners are preparing to sell the business. - Financial statements are provided at the time a corporation issues new shares. - Financial statements are provided on a regular basis, at least once a year. - Financial statements are provided only under special circumstances, usually once every five years.

Financial statements are provided on a regular basis, at least once a year. - Correct! In order to provide timely accounting information, the time period concept divides the life of an enterprise into distinct and relatively short (generally 12 months or less) accounting periods.

What are the major activities in the cash flow statement? Net income, distributions, and financing Net income, investing, and financing Financing, operating, and investing Distributions, operating, and investing

Financing, operating, and investing

What is one step in the process of preparing a journal entry? For each account, determine the balance from the prior year. For each account, determine whether the account is consolidated or not. For each account, determine the associated cash flow. For each account, determine if it has increased or decreased.

For each account, determine if it has increased or decreased.

When computing present and future values, to what does the term "compounding" refer? - Reducing the future value to its present value. - Length of time over which the value is computed. - Frequency with which interest is added to the principal. - Increasing the present value to its future value.

Frequency with which interest is added to the principal.

What is inventory? - Goods expected to be used as short-term supplies in the normal course of business - Goods expected to be used as long-term equipment in the normal course of business - Goods manufactured or purchased and held for sale in the normal course of business - Goods used to store property, plant, and equipment in the normal course of business

Goods manufactured or purchased and held for sale in the normal course of business

Which statement best describes the main features of inventories? Goods used by company employees on a daily basis Goods due from customers who have purchased on account Goods purchased and held for sale Goods used by a company on a long-term basis, usually more than five years

Goods purchased and held for sale

What is a single-step income statement? - Includes all other expenses, but omits income tax expense - Omits both interest expense and income tax expense - Groups and total revenues; groups and total expenses - Emphasizes separate computation of gross profit and operating income

Groups and total revenues; groups and total expenses - In a single-step income statement, all revenues are grouped together, all expenses are grouped together, and net income is computed as the difference between total revenues and total expenses.

What can be learned by comparing the inventory records to an end-of-period physical count of inventory? How many purchase returns were made during the period How many purchase discounts were taken during the period How much was paid for freight in during the period How much inventory was lost or stolen during the period

How much inventory was lost or stolen during the period

What is a bank reconciliation? - Contacting customers' banks to confirm sufficient funds to justify selling to the customer on credit - Identifying the reasons for the difference between the bank balance and the company's cash account balance - Checking the cash deposit total by having the amount computed by two independent people - Confirming the account and routing numbers on all company bank accounts

Identifying the reasons for the difference between the bank balance and the company's cash account balance - Correct! A bank reconciliation is the process of determining the reasons for the differences between the bank balance and the company's cash account balance.

Where and when should an expense already paid in cash be reported if it cannot be directly matched with an associated revenue? - In the balance sheet as an asset in the accounting period in which it is incurred - In the income statement as an asset in the accounting period in which it is incurred - In the balance sheet as a liability in the accounting period in which it is incurred - In the income statement as an expense in the accounting period in which it is incurred

In the income statement as an expense in the accounting period in which it is incurred - Correct! Expenses that cannot be matched with revenues are assigned to the accounting period in which they are incurred.

Which financial statement provides a detailed explanation of one component in the year-to-year change in the retained earnings balance? Income statement. Trial balance. Statement of cash flows. Balance sheet.

Income statement.

What is the impact of posting the correct amount to the wrong expense account? Incorrect total for all of the expense accounts Incorrect total for net income and total asset accounts Incorrect totals for individual expense accounts Incorrect total for all of the revenue accounts

Incorrect totals for individual expense accounts - Correct! Posting the correct amount to the wrong expense account would result in the correct total for all expenses, but individual expense account balances would be incorrect.

How does the amount in retained earnings change from one year to the next? Increased by net income and decreased by dividends and net loss Increased by net income and cash and decreased by liabilities Increased by total assets and decreased by dividends Increased by cash and decreased by dividends

Increased by net income and decreased by dividends and net loss

A policy requiring employees to take mandatory vacations is what type of control activity? Independent check Physical control of assets Proper authorizations Adequate documents

Independent check

An important internal control is making sure the requirement that all employees working for a company take their mandatory vacation time they are allowed to take each year. This policy allows an employee to cover the job responsibilities for other employees throughout the year and cross-train other employees on a variety of job functions within the company. Which type of control activity is this type of requirement? Physical control over assets and records Independent check Segregation of duties Adequate documents and records

Independent check - Correct! There are many ways to independently check performance. One way is through mandatory vacations, in which another employee performs the vacationing person's duties.

In order to compute the present value of a future amount, a person needs to know the amount and the length of time until the future amount is to be received. Which additional quantity does a person need to know in order to do this computation?

Interest rate Exchange rate Profit margin Debt ratio

What happens to any remaining undepreciated cost when an asset is scrapped? It is recorded as accumulated depreciation. It is recorded as a loss. It is recorded as a gain. It is recorded as a liability.

It is recorded as a loss.

In order to compute the present value of a future amount, a person needs to know the amount and the interest rate. Which additional quantity does a person need to know in order to do this computation? Asset category Currency Length of time Liability category

Length of time

What is one cash management tool? - Minimum amount in retained earnings, maximum amount in capital stock - Minimum amount in closing entries, maximum amount in adjusting entries - Minimum amount of cash in no-interest accounts, maximum amount of cash in higher-yielding investments - Minimum amount in adjusting entries, maximum amount in closing entries

Minimum amount of cash in no-interest accounts, maximum amount of cash in higher-yielding investments - Correct! A business must ensure that cash is wisely managed. Cash management practices include careful cash budgeting (to forecast future cash needs) and keeping as much cash as possible in higher-yielding investments rather than just in no-interest bank accounts.

Here are some accounts from Whole Pine Inc.'s financial statements: Inventory Accounts Payable Number of Shares Outstanding Capital Stock Accounts Receivable Retained Earnings Net Income Building Loans Payable What is used to compute Whole Pine's earnings per share (EPS)? Cash, Capital Stock, Retained Earnings Net Income and Number of Shares Outstanding Cash and Retained Earnings Retained Earnings and Capital Stock

Net Income and Number of Shares Outstanding

Here are some data from Quiet Flag Industries' financial statements: Inventory Accounts Payable Number of Shares Outstanding Capital Stock (also called Paid-In Capital) Accounts Receivable Cash Retained Earnings Net Income Building Loans Payable Which items are used to compute Quiet Flag's earnings per share (EPS)? Net Income and Number of Shares Outstanding Cash, Inventory, Accounts Receivable, and Building Accounts Receivable, Capital Stock, and Retained Earnings Cash, Loans Payable, and Retained Earnings

Net Income and Number of Shares Outstanding

How is earnings per share (EPS) computed? Total equity divided by sales revenue Net income divided by the number of shares Total expenses divided by sales revenue Net income divided by total sales revenue

Net income divided by the number of shares - Earnings per share, or EPS, is computed as net income (also called "earnings") divided by the number of ownership shares outstanding.

If an expense is improperly recorded as an asset, what impact does this have on the income statement? Net income is overstated. Net income is understated. Cash balance is understated. Cash balance is overstated.

Net income is overstated.

On January 1, Merrilton Company had these assets, liabilities, and equity: Cash $100 Inventory 140 Accounts Payable 70 Paid-in Capital 150 Retained Earnings 20 During the year, Merrilton Company entered into the following transactions: a. Sold inventory costing $80 for a total of $100. Cash of $30 was received, and the remaining $70 was put on account. b. Paid cash for wages of $25. c. Paid cash dividends of $10. What is Merrilton Company's net income (or net loss) for the year? Net income $20 Net loss $5 Net loss 15% Net income $10

Net loss $5

Total recorded sales, before any subtractions for discounts, returns, or allowances, is labeled gross sales. What is the label given to the sales amount after subtractions for discounts, returns, and allowances? Operating sales Accumulated sales Discount sales Net sales

Net sales

A company is involved in litigation over who must clean up a toxic waste site near one of the company's factories. The likelihood that the company will be required to pay for the cleanup is remote. How should the company report this lawsuit in its financial statements? A liability in the balance sheet; no disclosure in the financial statement notes A liability in the balance sheet; some disclosure in the financial statement notes No liability in the balance sheet; some disclosure in the financial statement notes No liability in the balance sheet; no disclosure in the financial statement notes

No liability in the balance sheet; no disclosure in the financial statement notes

A company is involved in litigation over who must clean up a toxic waste site near one of the company's factories. It is possible that the company will be required to pay for the cleanup. How should the company report this lawsuit in its financial statements? A liability in the balance sheet; no disclosure in the financial statement notes No liability in the balance sheet; no disclosure in the financial statement notes No liability in the balance sheet; some disclosure in the financial statement notes A liability in the balance sheet; some disclosure in the financial statement notes

No liability in the balance sheet; some disclosure in the financial statement notes

Merrilton Company has been sued by a group of shareholders who claim that they were deceived by the company's financial reporting practices. It is possible that the company will lose this lawsuit. How should the company report this lawsuit in its financial statements? - No liability in the balance sheet; no disclosure in the financial statement notes - A liability in the balance sheet; some disclosure in the financial statement notes - A liability in the balance sheet; no disclosure in the financial statement notes - No liability in the balance sheet; some disclosure in the financial statement notes

No liability in the balance sheet; some disclosure in the financial statement notes

What is an accurate description of accounts payable? Obligation arising from the payment of income taxes on account Obligation arising from the sale of equipment on account Obligation arising from the purchase of inventory on account Obligation arising from the sale of office supplies on account

Obligation arising from the purchase of inventory on account

What is a liability? - A residual amount representing the net assets available after all obligations have been satisfied - Economic resource that is owned or controlled by a company - The sum of operating, investing, and financing cash flows - Obligation to pay cash, transfer other assets, or provide services to someone else

Obligation to pay cash, transfer other assets, or provide services to someone else

What represents an obvious error a controller should be concerned about in the general ledger? The posting of adjusting entries The posting of closing entries Including accurately the posting of a a series of transactions Omitting completely the posting of a series of transactions

Omitting completely the posting of a series of transactions Correct! Errors can be introduced into the journal entries if the supporting documentation is lost or ignored so that the transaction is not recorded at all, the amount entered into the journal entry is incorrect, and the accounts involved in the journal entry are incorrectly identified.

What are control activities? - Policies and procedures to provide reasonable assurance that the company is in compliance with all posting and closing procedures - Policies and procedures to provide reasonable assurance that the company's established objectives will be met - Policies and procedures to provide reasonable assurance that the company is in compliance with all IRS income tax regulations - Policies and procedures to provide reasonable assurance that the company is in compliance with all SEC securities regulations

Policies and procedures to provide reasonable assurance that the company's established objectives will be met

What is a benefit of owning preferred shares rather than common shares? - Preferred shareholders have the right to all corporate assets once obligations to lenders and common shareholders are met. - Preferred shareholders have the right to vote in corporate matters, whereas common shareholders do not. - Preferred shareholders have the right to their dividends in full before common shareholders receive any dividends at all. - Preferred shareholders have the right to maintain their same percentage ownership if new shares are issued.

Preferred shareholders have the right to their dividends in full before common shareholders receive any dividends at all.

Which three types of inventory are held in a manufacturing business? - Raw materials, work-in-process, and finished goods - Finished goods, manufacturing equipment, and work-in-process - Work-in-process, finished goods, and cost of goods sold - Raw materials, accounts payable, and work-in-process

Raw materials, work-in-process, and finished goods

With respect to bad debts, what is the direct write-off method? - Estimating and recognizing bad debt expense in the same period in which the associated sale takes place - Recognizing bad debt expense after confirming that a specific customer is not going to pay - Including bad debt expense as a subtraction from the sales amount rather than as a separate expense - Including bad debt expense in the computation of cost of goods sold

Recognizing bad debt expense after confirming that a specific customer is not going to pay

What is the proper accounting treatment if the market value of a franchise exceeds its cost at the time of acquisition? Record the franchise asset at the excess of market value over cost. Record the franchise asset at cost. Record the franchise asset at market value. Record the franchise asset at the excess of cost over market value.

Record the franchise asset at cost.

In the context of accounting, what is the meaning of the word "journalizing"? Transmitting summarized data to the accountants preparing the financial statements Copying transaction data from a journal to a ledger Recording a transaction in a journal entry Copying transaction data from a ledger to a journal

Recording a transaction in a journal entry

What is accrual accounting? - Recording the amount of revenues and the amount of expenses when process cycles are complete - Recording revenues and expenses when earned or incurred, not when cash is received or paid - Recording the amount of revenues and the amount of expenses when budgets are approved and adopted - Recording the amount of revenues and the amount of expenses when cash is received or paid

Recording revenues and expenses when earned or incurred, not when cash is received or paid

What is cash basis accounting? - Separation of accounting items into operating, investing, and financing activities - Recording revenues when earned and expenses when incurred - Payment of all income taxes in cash in the period legally required - Recording revenues when earned and expenses when incurred - Payment of all income taxes in cash in the period legally required Recording revenues when cash is received and expenses when cash is paid

Recording revenues when cash is received and expenses when cash is paid

In the context of present values and future values, what is the meaning of the word "discount"? Increase a present amount to its future value. Reduce a present amount to its future value. Reduce a future amount to its present value. Increase a future amount to its present value.

Reduce a future amount to its present value.

Which account is credited when making closing entries? Unearned Revenue Prepaid Rent Expense Cash Rent Expense

Rent Expense The only accounts closed are the following: Revenues - originally recorded as credits (increases in equity) Expenses - originally recorded as debits (decreases in equity) Dividends - originally recorded as debits (decreases in equity) The accounts that are credited when closing entries are made are the ones (expenses and dividends) that were originally debited.

Which of these items is a use of cash in a financing activity? Paying wages Selling goods Buying buildings Repaying loans

Repaying loans

What is a statement of cash flows? - Report of the revenues and expenses of a company during a period. - Report of the assets, liabilities, and equity of a company as of a point in time. - Report of the operating, investing, and financing cash flows of a company during a period. - Report of the total of the balances of all of a company's bank accounts.

Report of the operating, investing, and financing cash flows of a company during a period.

To which item on the balance sheet does net income articulate? Capital Stock Sales Cash Retained Earnings

Retained Earnings

What is a real account? Cost of Goods Sold Dividends Retained Earnings Sales Revenue

Retained Earnings

Which item is an owners' equity item? - Accounts payable - Inventory - Retained earnings - Accounts receivable

Retained earnings - Retained earnings is an owners' equity item representing the cumulative amount of profits that the owners have kept in the business in order to buy assets. So, retained earnings is a source of money to buy assets.

The accountant for a company mistakenly posted a liability amount as a revenue in the general ledger. What is the financial statement impact? Expenses are too low, so reported net income is too high. Expenses are too high, so reported net income is too low. Revenues are too low, so reported net income is too low. Revenues are too high, so reported net income is too high.

Revenues are too high, so reported net income is too high. - Correct! If the liability amount is reported as a revenue, then the general ledger contains too many revenues and an incorrectly low amount of liabilities. If revenues are mistakenly reported as being high, then the reported net income is too high.

Which legal right belongs to the owner of a franchise? - Right to protection from other companies selling a company product for a specified number of years - Right to operate a business of a specified type for a specified number of years - Right to use a certain symbol or likeness for a specific number of years - Right to use another company's business ideas in conducting business for a specified number of years

Right to use another company's business ideas in conducting business for a specified number of years

Which one of these items is a nominal account? Sales Revenue Capital Stock Retained Earnings Accounts Payable

Sales Revenue *Nominal accounts = Revenues, Expenses, and Dividends. Real accounts = Asset, Liability, and Owners' Equity accounts.

Orange Zest Company is a publicly traded corporation. Orange Zest Company is closely followed by several financial analysts. These analysts publish forecasts for what Orange Zest Company's net income for the year will be. If Orange Zest Company's announced net income is lower than the average of these analyst forecasts, the value of Orange Zest Company's shares can drop dramatically. The past few months have been tough ones for Orange Zest Company. Orange Zest Company's chief financial officer (CFO) is worried that the company will not be able to reach the amount forecasted by the financial analysts. The CFO is eagerly awaiting the computation of Orange Zest Company's net income for the year. Here are some accounts from Orange Zest Company's financial statements: Cost of Goods Sold Cash Retained Earnings Sales Inventory Income Tax Expense Loans Payable What should be used to compute Orange Zest Company's net income? Sales, Cost of Goods Sold, and Income Tax Expense Cash and Loans Payable Inventory, Cash, and Loans Payable Cash and Retained Earnings

Sales, Cost of Goods Sold, and Income Tax Expense

What number is ignored in the computation of declining-balance depreciation in the first year of the asset's life? Salvage value Book value Asset cost Useful life

Salvage value

What are the three preventive controls? - Independent checks, fraud detection, and postclosing confirmation - Adequate documents, error detection, and postadjusting confirmation - Segregation of duties, proper authorizations, and physical control - Physical control, independent checks, and adequate documents

Segregation of duties, proper authorizations, and physical control 3 preventative controls are segregation of duties, proper procedures for authorizations, and physical control over assets and records. Detective controls = Independent checks and Adequate documents

Bullzai Inc. has recently taken part in the following business transactions: Borrowed cash from a bank. Purchased a building. Sold an old, used machine. Collected cash from customers. Which of these items is a source of cash from an investing activity? Collecting cash from customers Selling an old, used machine Buying a building Borrowing cash from a bank

Selling an old, used machine - Selling an old, used machine is a source of cash from an investing activity.

Which financial statement provides a detailed explanation of the year-to-year change in the cash account balance? Statement of cash flows. Statement of retained earnings. Balance sheet. Income statement.

Statement of cash flows

Which financial statement provides a detailed explanation of the year-to-year change in the cash account balance? Statement of retained earnings. Balance sheet. Statement of cash flows. Income statement.

Statement of cash flows.

Three steps for Adjusting Entries

Step 1: Debit or Credit to Fix the Balance Sheet (Assets & Liabilities) Step 2: Debit or Credit to Fix the Income Statement (Revenue and Expenses) Step 3: Make sure your entry does NOT include Cash!!

Malik Martin is the assistant manager in a supermarket. As he reviewed the company's business reports for the year, he found one labeled "Inventory Shrinkage Report." This report detailed that inventory shrinkage for his supermarket in the past year was 10 percent. What does this information mean for Mr. Martin's supermarket? - Ten percent of the inventory was lost or stolen in the past year. - Ninety percent of the inventory was subject to purchase discounts in the past year. - Ninety percent of the inventory was on consignment in the past year. - Ten percent of the inventory was in transit in the past year.

Ten percent of the inventory was lost or stolen in the past year.

What is a company's control environment? - The system of posting between the general journal and the general ledger - The closing process wherein the nominal accounts are closed - The system of assigning account numbers to ensure the internal consistency of the chart of accounts - The actions, policies, and procedures that reflect the overall attitudes of top management

The actions, policies, and procedures that reflect the overall attitudes of top management Correct. The control environment consists of the actions, policies, and procedures that reflect the overall attitudes of top management, the directors, and the owners about control and its importance to the company.

What is the relationship between the cash balance and the amount of retained earnings? - The amount of cash is always equal to the balance in retained earnings. - The amount of cash has no direct relationship to the retained earnings. - The amount of cash is always more than the balance in retained earnings. - The amount of cash is always less than the balance in retained earnings.

The amount of cash has no direct relationship to the retained earnings. - Correct! Retained earnings is not the same as cash. Cash is an asset; retained earnings represents one source of financing (along with borrowing and direct stockholder investment) that a corporation can use to get funds to acquire assets.

Why is the interest rate on a mortgage loan typically lower than the interest rate on an ordinary loan? - The asset purchased with the mortgage loan proceeds serves as collateral for the loan. - Interest on a business mortgage loan is tax deductible, whereas interest on an ordinary loan is not. - Mortgage loans typically last for a shorter time period than do ordinary loans. - Mortgage loans are typically obtained from inventory suppliers, whereas ordinary loans are obtained from banks.

The asset purchased with the mortgage loan proceeds serves as collateral for the loan. Correct! A mortgage loan typically has a lower interest rate because the property being purchased is used as collateral on the loan, thereby providing the lender with less risk.

How does the use of a cash register in a supermarket illustrate separation of duties? - The cash register keeps the cash in an organized place so the supervising manager can periodically count it. - The cash register can only be opened by a cashier or manager with a key or code. - The cash register provides physical security for the amount of cash. - The cash register maintains the record of how much cash should be in the drawer.

The cash register maintains the record of how much cash should be in the drawer. "separation of duties," Periodical cash counts by a manager is "independent checks)."

What accounting action is necessary when an asset becomes worthless and must be scrapped? - The cost of asset and accumulated depreciation are reclassified from long-term assets to current assets. - The cost of asset is moved from the asset to the liability side of the balance sheet. - The accumulated depreciation of the asset is moved to the liability side of the balance sheet. - The cost of asset and accumulated depreciation must be removed from the books.

The cost of asset and accumulated depreciation must be removed from the books.

What does owners' equity represent? The difference between current assets and long-term assets The difference between total liabilities and total owners' equity The difference between total assets and total liabilities The difference between current liabilities and long-term liabilities

The difference between total assets and total liabilities

Why do companies sometimes pay managers with a combination of a fixed salary plus an earnings-based bonus rather than just pay a higher fixed salary? - The earnings-based bonus plan is a way to reduce the amount of annual interest payments to banks. - The earnings-based bonus plan is a way for shareholders to receive extra cash dividends from the company. - The earnings-based bonus plan reduces the amount of property taxes that the company must pay. - The earnings-based bonus plan causes the managers to work harder to increase the net income of the company.

The earnings-based bonus plan causes the managers to work harder to increase the net income of the company.

Without the proper separation of duties, how might a dishonest warehouse employee conceal the theft of inventory? - The employee handing the inventory can steal the inventory from the warehouse. - The employee handling the inventory can also falsify production documents. - The employee handling the inventory can destroy the relevant inventory accounting records. - The employee handling the inventory can also falsify the inventory accounting records.

The employee handling the inventory can also falsify the inventory accounting records. - Correct! If the inventory records are maintained by an employee who also has access to the inventory itself, inventory can be stolen or "borrowed," and the employee can cover up the shortage by falsifying the inventory accounting records.

How is an internally generated trademark reported on a company's balance sheet? - The internally generated trademark is reported at appraisal value. - The internally generated trademark is reported at estimated selling price. - The internally generated trademark is reported at estimated market value. - The internally generated trademark is generally not reported.

The internally generated trademark is generally not reported.

With respect to a valuable trademark that a company has internally developed, which costs are capitalized? The estimated cost savings from owning the trademark The legal determination of the value of the trademark The developed trademark's estimated purchase cost The legal filing costs associated with registration

The legal filing costs associated with registration

Maya Kalani, a financial statement analyst, is currently doing an analysis of the income statement of a local company. At the bottom of the income statement, she sees a note saying that the company uses the FIFO method of inventory valuation. With a FIFO inventory cost flow assumption employed by the company, which inventory units can Maya assume are remaining at the end of the period to be reported in ending inventory? The new units The cost of goods sold units A mixture of units The old units

The new units

With a LIFO inventory cost flow assumption, which inventory units are assumed to be sold first? The new units A mixture of units The consignment of units The old units

The new units

For most companies, when assets or liabilities are classified as "current" on the balance sheet, it generally means the related assets or liabilities will be turned into cash or will be required to be paid, respectively, within what time frame? The next quarter The next year The next six months The next month

The next year Assets or liabilities classified as "current" are expected to be converted to cash within a year.

With a FIFO inventory cost flow assumption, which inventory units are assumed to be sold first? The new units The old units The consignment units A mixture of units

The old units

Which statement is true with respect to the present value of $100 to be received five years from now? The present value is equal to $200. The present value is more than $100. The present value is more than $200. The present value is less than $100.

The present value is less than $100. -The present value of an amount to be received in the future is always less than the future amount.

At the end of a period, what happens to balances existing in real accounts? - They are added to the balances in the nominal accounts. - They are closed to zero at the period's end. - They are subtracted from the balances in the nominal accounts. - They are carried forward to the next period.

They are carried forward to the next period

When land is purchased, what is the proper accounting for the costs paid for commissions, legal fees, and clearing and grading? - They are recorded as part of the cost of the land. - They are recorded as a subtraction from equity in the balance sheet. - They are recorded as part of cost of goods sold in the year of the land purchase. - They are recorded as an operating expense in the year of the land purchase.

They are recorded as part of the cost of the land.

Why are daily cash deposits important? - They maintain the balance between inventory and cost of goods sold. - They maintain the balance between the ledger accounts and the real accounts. - They keep the ledger accounts separate from the journal accounts. - They focus cash responsibility on the one individual assigned to make the deposits.

They focus cash responsibility on the one individual assigned to make the deposits. - Correct! The disciplined, rigid process of daily cash deposits ensures that personal responsibility for the handling of cash is focused on the individual assigned to make the regular deposit.

Why are daily cash deposits important? They maintain the balance between the nominal and the real accounts. They maintain the balance between the accounts payable and the accounts receivable. They keep the ledger accounts separate from the journal accounts. They prevent the accumulation of a large amount of cash.

They prevent the accumulation of a large amount of cash.

What is the general presumption with respect to accounting for advertising costs? They should be amortized. They should be depreciated. They should be expensed. They should be capitalized.

They should be expensed.

According to the accounting rules, what are operating activities? - Those activities whereby cash is obtained from or repaid to owners and creditors - Those activities associated with buying and selling long-term assets—primarily the purchase and sale of land, buildings, and equipment - Those activities that are part of the day-to-day business of a company - Those activities associated with forecasting sales and determining the amount and timing of materials purchases, employee hiring, and overhead costs

Those activities that are part of the day-to-day business of a company

What are financing activities? - Those activities whereby cash is obtained from or repaid to owners and creditors. - Those activities associated with forecasting sales and determining the amount and timing of materials purchases, employee hiring, and overhead costs. - Those activities associated with buying and selling long-term assets—primarily the purchase and sale of land, buildings, and equipment. - Those activities that are part of the day-to-day business of a company.

Those activities whereby cash is obtained from or repaid to owners and creditors.

Three Steps for Closing Entries

Three Steps for Closing Entries Step 1. Separate NOMINAL accounts from real accounts. Step 2. Debit or credit each nominal account to make balance = $0. Step 3. Corresponding debit or credit to Retained Earnings.

For what can an inventory count be used when a periodic inventory method is used? To determine whether any inventory has been lost or stolen To determine the only way purchase returns should be taken To determine the only way to compute cost of goods sold To determine whether purchase discounts should be taken

To determine the only way to compute cost of goods sold

For what can an inventory count be used when a perpetual inventory method is employed? To determine whether purchase discounts should be taken To determine the only way purchase returns should be taken To determine the only way to compute cost of goods sold To determine whether any inventory has been lost or stolen

To determine whether any inventory has been lost or stolen

In making a journal entry, why is it important to know whether an account increased or decreased? To determine whether the transaction impacts the balance sheet To determine whether the account should be debited or credited To determine whether the transaction impacts the income statement To determine whether the transaction will be posted to the ledger

To determine whether the account should be debited or credited

Soren Zincmann is the owner of a small business. Historically, Soren has been terrible at maintaining proper records, so he has decided to start a new business budgeting system. As a first step toward this goal, Soren wants to gather information on how he spent his money each month over the past year. Searching through his records, he realizes that, except for the monthly rent on his business office, he paid every other expense in cash. Why is it important to make all payments with a check or an electronic transfer? To maintain good documentation To quickly record cost of goods sold To maintain the correct balances in the closing entries To speed the posting of accounts receivable

To maintain good documentation

What does it mean to capitalize a cost? To record it as an expense To record it as an asset To record it as part of equity To record it as cost of goods sold

To record it as an asset

According to the accounting equation, what is the correct computation of owners' equity? Cash - Bank Loan Balance Total Assets - Liabilities Total Assets + Liabilities Cash + Bank Loan Balance

Total Assets - Liabilities Assets = Liabilities + Owners' Equity Owners' Equity = Assets - Liabilities

A company issued capital stock to new investors in exchange for $100,000 cash. What is the effect of this transaction on the accounting equation? Total assets increase and owners' equity decreases. Total liabilities and owners' equity increase. Total liabilities increase and owners' equity decreases. Total assets and owners' equity increase.

Total assets and owners' equity increase. Total assets and owners' equity increase. The asset is cash.

When are inventory records updated with respect to perpetual and periodic inventory systems? - With a periodic system, inventory records are updated only when cash is collected; no Accounts Receivable are recorded. - With a perpetual system, inventory records are not updated when a sale is made; only the dollar amount of the sale is recorded. - With a perpetual system, inventory records are updated whenever a purchase or a sale is made. - With a periodic system, inventory records are updated whenever a purchase or a sale is made.

With a perpetual system, inventory records are updated whenever a purchase or a sale is made. Perpetual system: inventory records are updated whenever a purchase or a sale is made. Periodic system: inventory records are not updated when a sale is made; only the dollar amount of the sale is recorded.

Who retains ownership with respect to goods on consignment? - With goods on consignment, the supplier of the inventory reports the inventory as an asset on the balance sheet because the inventory is physically located at the seller's location. - With goods on consignment, the supplier of the inventory transfers ownership of the inventory as soon as the inventory arrives at the physical location of the seller. - With goods on consignment, the supplier of the inventory maintains ownership of the inventory until it is sold, even though the inventory is physically located at the seller's location. - With goods on consignment, the supplier of the inventory transfers ownership of the inventory as soon as the inventory is in transit to the physical location of the seller.

With goods on consignment, the supplier of the inventory maintains ownership of the inventory until it is sold, even though the inventory is physically located at the seller's location.

Why is the separation-of-duties control so important with cash? - Without separation of duties, the general ledger is maintained by the same person who posts the adjusting entries. - Without separation of duties, an employee who takes cash can cover up the shortage by adjusting the accounting records. - Without separation of duties, the general ledger is maintained by the same person who posts the closing entries. - Without separation of duties, the adjusting entry process and the closing entry process are done by the same person.

Without separation of duties, an employee who takes cash can cover up the shortage by adjusting the accounting records.