Financial Accounting Final Exam

If ballard company reported assets of $500 and liabilities of $200, ballards stockholder equity equals:

$500 Assets must equal claims, so in order to find stockholder equity you must subtract $500-$200

Assets:$500 +$800 Liabilities: $200 Common stock: $400 Retained Earnings: ? What must retained earnings be to balance the equation?

$700

How does the recording of accrued salary expense at the end of the year affect the financial statements of a business?

+ in liabilities, - in equity, + in expense, - in net income

On January 1, Year 2, Grande Company had a $16,000 balance in the accounts receivable account and a zero balance in the allowance for doubtful accounts account. During year 2, Grande recognized $104,000 of service revenue earned on account. The company collected $97,000 cash from accounts receivable. Uncollectible accounts are estimated to be 2% of sales on account. Based on this information, the amount of cash flow from operating activities that would appear on the year 2 statement of cash flows is: A. $97,000 B. $104,000 C. $89,520 D. $95,060

A. $97,000

If a company's total assets increased while liabilities and common stock were unchanged, then which of the following statements is true? A. Revenues were greater than expenses B. retained earnings were less than net income during the period C. No dividends were paid during the period D. The company must have purchased assets with cash

A. Revenues were greater than expenses

Which of the following would not appear on a balance sheet? A. Service revenue B. Salaries payable C. Unearned revenue D. Neither service revenue nor unearned revenue would appear on a balance sheet

A. service revenue Service revenue is an income statement account, unearned revenue is a liability that would appear on the balance sheet

Jackson Company had a net increase in cash from operating activities of $11,900 and a net decrease in cash from financing activities of $2,200. If the beginning and ending cash balances of the company were $3,800 and $13,000 respectively, what is the net cash change from investing activities? A. An outflow or decrease of $500 B. An inflow or increase of $2,200 C. An inflow or increase of $2,200 D. zero

An outflow or decrease of $500 $11,900+$3,800-$2,200= $13,500 (has to=$13,000) Decrease of $500

An event that causes one asset account to decrease and another asset to increase is called?

Asset exchange transaction

Abbott Company purchased $8,200 of merchandise inventory on account. Abbott uses the perpetual inventory method. How does this transaction affect the financial statements? A. Decrease accounts payable and decrease purchases B. Increase inventory and increase accounts payable C. Increase cost of goods sold and increase accounts payable D. Decrease accounts payable and decrease inventory

B. Increase inventory and increase accounts payable

Faust Company uses the perpetual inventory method. Faust sold goods that cost $5,500 for $9,000. If the sale was made on account, the net effect of the sale will: A. Increase total stockholders' equity by $9,000 B. Increase total assets by $3,500 C. Increase total assets by $5,500 D. Increase total assets by $9,000

B. Increase total assets by $3,500

Middleton Company uses the perpetual inventory method. The company purchased an item of inventory for $90 and sold the item to a customer for $150. What effect will the sale have on the company's inventory account? A. The inventory account will decrease by $150 B. The inventory account will decrease by $90 C. The inventory account will decrease by $60 D. There is no effect on the inventory account

B.. The inventory account will decrease by $90

Which of the following is not subject to depreciation? A. Computers B. Buildings C. Land D. Office furniture

C. Land Land is not subject to depreciation. Land has an infinite life. It is not worn out or consumed as it is used.

The cost of goods sold account is classified as: A. A liability B. An asset C. A contra asset D. An expense

D. an expense

On January 1, Year 2, Grande Company had a $71,000 balance in the Accounts Receivable account and a $2,900 balance in the Allowance for Doubtful Accounts account. During Year 2, Grande recognized $190,000 of service revenue earned on account. The company collected $227,700 cash from accounts receivable. Uncollectible accounts are estimated to be 1% of sales on account. Based on this information, the amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows is: a)$227,700 b)$3050 c)$31,500. d)1900.

a)$227,700 $227,700 cash collected from accounts receivable is a cash inflow for operating activities.

On January 1, Year 1, Friedman Company purchased a truck that cost $48,000. The truck had an expected useful life of 100,000 miles over 8 years and an $8,000 salvage value. During Year 2, Friedman drove the truck 18,500 miles. The company uses the units-of-production method. The amount of depreciation expense recognized in Year 2 is: a)$8,880. b)$7,400. c)$6,000. d)$5,000.

b)$7,400. ($48,000 − $8,000) ÷ 100,000 miles = $0.40 per mile depreciation expense; 18,500 miles × $0.40 per mile = $7,400 depreciation expense in Year 2.

On January 1, Year 2, the Accounts Receivable balance was $19,400 and the balance in the Allowance for Doubtful Accounts was $1,600. On January 15, Year 2, an $440 uncollectible account was written-off. The net realizable value of accounts receivable immediately after the write-off is: a)$17,360. b)$18,240 c)$17,800 d)$18,960

d)$18960 $19,400 − $440 = $18,960 accounts receivable balance after the write-off; $1,600 − $440 = $1,160 allowance balance after the write-off; $18,960 − $1,160 = $17,800 net realizable value after the write-off.

The complete collection of a company's accounts is called the:

general ledger

Earning cash revenue by providing services to customers will cause the amount of cash to______ and the amount of retained earnings to____.

increase; increase

On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method of accounting for uncollectible accounts. In February of Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. Which of the following answers correctly states the effect of recording the collection of the reestablished receivable on April 4, Year 2?

$1,050($1,050) in assets, $1,050 in statement of cash flows This is an asset exchange transaction. Once the receivable is reestablished, collection of the receivable is recorded as an increase to assets (cash) and a decrease to assets (accounts receivable), resulting in no net effect to assets. It is reported as a cash inflow for operating activities.

Borrowing cash from creditors affects the company's financial statements how?

+ in assets, liabilities, and statement of cash flow. It is a finance activity

Jack's Snow removal company received a cash advance of $14,400 on December 1, year 1 to provide services during the months of December, January and February. The year-end adjustment on December 31, year 1 to recognize the partial expiration of the contract will A. Increase stockholders' equity by $4,800 B. Increase assets by $4,800 C. Increase liabilities by $4,800 D. Increase assets by $4,800 and Increase stockholders' equity by $4,800

A. Increase stockholders'' equity by $4,800

Use the following account numbers and corresponding account titles to answer the following question. 1. Cash 2. Merchandise inventory 3. Cost of goods sold 4. Transportation out 5. Dividends 6. Common stock 7. Selling expense 8. Loss on sale of land 9. Sales revenue Which accounts would be reported on the balance sheet?

Account numbers 1, 2, and 6

Jason company paid $7,200 for one years rent in advance beginning on October 1, Year 1. Jason's year 1 income statement would report rent expense, and its statement of cash flows would report cash outflow for rent, respectively, of A. $7,200;$7,200 B. $1,800; $1,800 C. $1,800; $7,200 D. $1,200; $7,200

C. $1,800; $7,200 $7,200 x 3/12= $1,800 rent expense; $7,200 payment on 10/1/year 1 is a cash outflow for rent.

Jason Company paid $2,400 for one year's rent in advance beginning on October 1, Year 1. Jason's Year 1 income statement would report rent expense, and its statement of cash flows would report cash outflow for rent, respectively of: A. $600; $600 B. $400; $2,400 C. $600; $2,400 D. $2,400; $2,400

C. $600; $2,400 $2,400x 3/12= $600 rent expense; $2,400 payment on 10/1/Year 1 is a cash outflow for rent

Which of the following is a disadvantage of a corporate form of business? A. Limited liability B. Transferability of ownership C. Double taxation D. Continuity of existence

C. Double taxation

Which inventory costing method will produce an amount for cost of goods sold that is closest to current market value? A. Weighted average B. Specific identification C. LIFO D. FIFO

C. LIFO LIFO will produce cost of goods sold that is based on the most recent purchases.

When it is liquidated, a company has assets of $500 cash, $800 of liabilities, $400 of common stock and a deficit of ($700) in retained earnings. Based on this information:

Creditors will receive $500, owners receive zero. Creditors are paid before owners

Which of the following has a single owner? A. Federal government B. Partnership C. Corporation D. Sole proprietorship

D. Sole proprietorship

The income statement does what?

Matches revenue (benefits) with the expenses (sacrifices) that were incurred to generate the revenue

Which of the following reflects the effect of the year end adjusting entry to record estimated uncollectible accounts expense using the allowance method?

- in assets, - in stockholders' equity, + in expense, - in net income

Internal control is a process designed to ensure:

-Reliable financial reporting -effective and efficient operations -compliance with applicable laws and regulations - includes procedures to safeguard a company's assets

Revenue on account amounted to $5,200. Cash collections of accounts receivable amounted to $3,200. Expenses for the period were $2,700. The company paid dividends of $750. What was the amount of net income for the period? A. $2,500 B. $2,450 C. $500 D. $1,750

A. $2,500 Net income= revenue of $5,200- expenses of $2,700= $2,500 Dividends do not affect the determination of net income.

Which of the following is considered a product cost? A. Utility expense for the current month B. Salaries paid to employees of a retailer C. Transportation costs on goods purchased from suppliers D. Transportation cost on goods shipped to customers

C. Transportation costs on goods purchased from suppliers

What items are presented on a statement of changes in stockholders' equity?

Dividends net income total stockholder equity beginning common stock ending retained earnings

the assumption a company will be able to continue operations into the foreseeable future is:

going concern

The financial statement that shows all the revenues earned and expenses incurred during the accounting period is:

income statement

Emir Company purchased equipment that cost $110,000 cash on January 1, Year 1. The equipment had an expected useful life of six years and an estimated salvage value of $8,000. Assuming that Emir depreciates its assets under the straight-line method, the amount of depreciation expense shown on the income statement prepared for Year 4 and the amount of accumulated depreciation shown on the balance sheet prepared as of December 31, Year 4, respectively, would be:

$17,00 depreciation expense, $68,000 accumulated depreciation ($110,000 − $8,000) ÷ 6 years = $17,000 depreciation expense each year; $17,000 × 4 years = $68,000 accumulated depreciation at the end of Year 4.

On January 12, Year 1, Gilliam Corporation issued 550 shares of $12 par-value common stock for $15 per share. The number of shares authorized is 5,000, and the number of shares outstanding prior to this transaction is 1,200. Which of the following answers describes the effect of the January 12, Year 1 transaction?

$8,250 in cash, $6,600 in common stock, $1650 PIC in excess, $8,250 FA in statement of cash flows The event increases assets (cash) and stockholders' equity. Assets (cash) increase by $8,250 (=550 shares × $15). The increase in stockholders' equity is divided into two parts, common stock increases by $6,600 (= 550 shares × $12 par value) and paid-in excess of par value − common increases by $1,650 (= $8,250 − $6,600). The cash inflow is a financing activity.

On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method of accounting for uncollectible accounts. In February of Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. Which of the following answers correctly states the effect of the December 31, Year 1 adjusting entry for uncollectible accounts on the financial statements of the Loudoun Corporation?

($3,3750 in assets, ($3,375) in stockholders' equity, $3,375 in expense, ($3,375) in net income $112,500 credit sales × 3% = $3,375 uncollectible accounts expense. The adjusting entry decreases assets (by reducing the net realizable value of receivables) and decreases stockholders' equity (retained earnings). On the income statement, it increases expenses (uncollectible accounts expense), which decreases net income. It does not affect the statement of cash flows.

A machine with a book value of $38,000 is sold for $32,000 cash. Which of the following answers would accurately represent the effects of the sale on the financial statements?

($6,000) in assets, ($6,000) in stockholders' equity, $6,000 in expense/ loss, ($6,000) in net income, $32,000 IA in statement of cash flows

Yowell Company granted a sales discount of $360 to a customer when it collected the amount due on account. Yowell uses the perpetual inventory system. Which of the following answers reflects the effects on the financial statements of only the discount?

(360) in assets, (360) in equity, (360) in revenue, (360) in net income

A company purchased inventory on account. If the perpetual inventory method is used, which of the following choices accurately reflects how the purchase affects the company's financial statements?

+ in assets, + in liabilities

How des earned revenue on account affect the financial statements?

+ in assets, + in stockholders' equity, + in revenue, + in net income

What accurately reflects how the recording of accrued salary expense at the end of the year affects the financial statements of a business?

+ in liabilities, - in equity, + in expense and - in net income

Jantzen Company recorded employee salaries earned but not yet paid. Which of the following represents the effect of this transaction on the following statements?

+ in liabilities, - in equity, + in expense, - in net income

How does paying a cash dividend affect a company's financial statement?

- in assets, - in equity, and - in statement of cash flows. It is a finance activity

Chubb Company paid cash to purchase equipment on January 1, Year 1. Select the answer that shows how the recognition of depreciation expense in Year 2 would affect the financial statements (+ means increase, − decrease, and NA not affected).

- in assets, - in stockholders' equity, + in expense, - in net income Depreciation expense decreases assets by increasing the contra asset account, accumulated depreciation, which decreases the book value of the asset, and increases expenses (depreciation expense), which decreases net income and stockholders' equity (retained earnings). It does not affect the statement of cash flows.

Becker's bookstore shipped merchandise FOB destination to a customer. If the transportation costs are paid in cash, which of the following choices reflects how this transaction will affect the company's financial statements?

- in assets, - in stockholders' equity, + in expense, - in net income, -OA in Statement of cash flows FOB destination means seller is responsible for freight cost, which is called transportation-out

At the end of Year 2, retained earnings for the Baker Company was $2,050. Revenue earned by the company in year 2 was $2,300, expenses paid during the period were $1,250, and dividends paid during the period were $650. Based on this information alone, what was the amount of retained earnings at the beginning of year 2? A. $1,650 B. $2,450 C. $4,600 D. $1,000

A, $1,650 Beginning retained earnings+ revenue- expenses-dividends= ending retained earnings beginning retained earnings+ $2,300-$1,250-$650=$2,050 Beginning retained earnings =$1,650

Jason Company paid $5,700 for one year's rent in advance beginning on October 1, year 1. Jason's year 1 income statement would report rent expense, and its statement of cashflows would report cash outflow for rent, respectively, of: A. $1,425; $5,700 B. $1,425; $1,425 C. $5,700; $5,700 D. $950; $5,700

A. $1,425; $5,700 $5,700x 3/12= $1,425 rent expense; $5,700 payment on 10/1/year 1 is a cash outflow for rent

Stubbs Company uses the perpetual inventory method. On January 1, Year 1, Stubbs purchased 1,050 units of inventory that cost $8.50 each. On January 10, Year 1, the company purchased an additional 600 units of inventory that cost $5.50 each. If Stubbs uses a weighted average cost flow method and sells 1,500 units of inventory for $17.00 each, the amount of gross margin reported on the income statement will be: A. $14,385 B. $19,850 C. $23,000 D. $14,820

A. $14,385 Under the weighted-average method, the average cost of inventory is reported on both the income statement and the balance sheet. Weighted average cost per unit = [(1,050 × $8.50) + (600 × 5.50)] ÷ 1,650 = $7.41 per unit; Cost of goods sold = 1,500 × $7.41 = $11,115 cost of goods sold; Sales = 1,500 × $17 = $25,500; $25,500 sales − $11,115 cost of goods sold = $14,385 gross margin.

Nelson Company experienced the following transactions during year 1, its first year in operation. 1. Issued $9,000 of common stock to stockholders 2. Provided $5,300 of services on account 3. Paid $2,350 cash for operating expenses 4. Collected $3,400 of cash from accounts receivable 5. Paid a $250 cash dividend to stockholders What is the amount of retained earnings that will be shown on the company's balance sheet prepared as of December 31, Year 1? A. $2,700 B. $2,950 C. 2,150 D. $11,700

A. $2,700 Ending retained earnings= $0 beginning retained earnings+ $2,950($5,300 service on account-$2,350 operating expense)net income-$250 dividend =$2,700

Sheldon company began year 1 with $1,700 in its supplies account. During the year, the company purchased $5,000 of supplies on account. The company paid $2,600 on accounts payable by year end. At the end of year 1, Sheldon company counted $2,900 on supplies on hand. Sheldon financial statements for year 1 would show: A. $2,900 of supplies; $3,800 of supplies expense B. $4,100 of supplies; $5,000 of supplies expense C. $4,100 of supplies; $1,200 of supplies expense D. $2,900 of supplies; $2,100 of supplies expense

A. $2,900 of supplies; $3,800 of supplies expense $2,900 of supplies on hand is the supplies asset on the balance sheet; $1,700 beginning balance + $5,000 of supplies purchased -$2,900 ending balance =$3,800 supplies expense

Alpha Associates was organized on January 1, Year 1. Alpha was organized as a partnership. Alpha reported $200,000 of before tax income during Year 1 and the partners withdrew $30,000 from the company. Assuming a corporate income tax rate of 30% and a personal income tax rate of 15%, the total amount of tax collected by the government is A. $30,000. B. $64,500. C. $60,000. D. $90,000.

A. $30,000. The government would collect $30,000 ($200,000 × .15) from the partners who would be taxed at their personal tax rate. Partners are taxed on their share of total partnership income regardless of how much of the income is withdrawn from the partnership. There would be no corporate income tax required.

Keisha Dress Shops experienced the following events during its third accounting period. (1) Sold merchandise that cost $92,000 for $140,000 cash. (2) Paid $30,000 of operating expenses. (3) Paid a $4,000 cash dividend. Based on this information, the amount of the gross margin is A. $48,000 B. $18,000 C. $14,000 D. None

A. $48,000 Gross margin is determined by subtracting cost of goods sold from the sales revenue. In this case, $140,000sales revenue- $92,000cogs

Ballard Company uses the perpetual inventory system. The company purchased $10,000 of merchandise from Andes company under the terms 2/10, net/30. Ballard paid for the merchandise within 10 days and also paid $450 freight to obtain the goods under terms FOB shipping point. All of the merchandise purchased was sold for $19,000 cash. What is the gross margin that resulted from these transactions? A. $8,750 B. $8,550 C. $10,000 D. $9,000

A. $8,750 Cost of goods sold=(purchase of inventory $10,000x0.98)+ transportation-in $450= $10,250; sales revenue $19,000- cost of goods sold $10,250= gross margin $8,750

On January 1, Year 1, Missouri Company purchased a truck that cost $55,000. The truck had an expected useful life of 10 years and a $5,000 salvage value. The amount of depreciation expense recognized in Year 2 assuming that Missouri uses the double declining-balance method is: A. $8,800. B. $8,000. C. $5,500. D. $11,000.

A. $8,800. $55,000 × (2 × 10%) = $11,000 depreciation expense in Year 1. ($55,000 − $11,000) × (2 × 10%) = $8,800 depreciation expense in Year 2.

Madison Company owned an asset that had cost $44,000. The company sold the asset on January 1, Year 4, for $16,000. Accumulated depreciation on the day of sale amounted to $32,000. Based on this information, the sale would result in: A. A $16,000 cash inflow in the investing activities section of the cash flow statement. B. A $16,000 increase in total assets. C. A $4,000 gain in the investing activities section of the statement of cash flows. D. A $4,000 cash inflow in the financing activities section of the cash flow statement.

A. A $16,000 cash inflow in the investing activities section of the cash flow statement. This transaction increases assets (cash) by $16,000, decreases assets (the book value of asset) by $12,000 (or cost of $44,000 − accumulated depreciation of $32,000), resulting in a net increase in assets of $4,000. Because the cash proceeds of $16,000 exceed the asset's book value of $12,000, Madison also reports a gain on the sale of $4,000, which increases revenue (gain), net income, and stockholders' equity (retained earnings). The gain is not reported in the investing activities section; instead, the $16,000 cash proceeds are reported as a cash inflow for investing activities.

Balance Sheets As of December 31 Year 3 Year 2 Accounts receivable: Year 3: $600,000 Year 2: $480,000 Allowance for doubtful accounts: Year 3: (40,000) Year 2: (20,000) Net accounts receivable: Year 3 $560,000 Year 2: $460,000 Inventories, lower of cost or market Year 3: $500,000 Year 2: $400,000 Income Statement For the Years Ended December 31 Net credit sales Year 3: $2,400,000 Year 2: $1,950,000 Net cash sales Year 3: 600,000 Year 2: 450,000 Net sales Year 3: 3,000,000 Year 2: 2,400,000 Cost of goods sold Year 3: 1,800,000 Year 2: 1,520,000 Selling, general, and administrative expenses Year 3: 300,000 Year 2: 240,000 Other expenses Year 3: 80,000 Year 2: 50,000 Total operating expenses Year 3: $2,180,000 Year 2: $1,810,000 a. Compute the accounts receivable turnover for Year 3. b. Compute the inventory turnover for Year 3. c. Compute the net margin for Year 2.

A. Accounts receivable turnover: 4.71 times B. Inventory turnover: 4.00 times c. Net margin: 24.58% a. Accounts receivable turnover=Net credit sales ÷ Average net receivables =$2,400,000 ÷ $510,000 = 4.71 times b. Inventory turnover=Cost of goods sold ÷ Average inventories =$1,800,000 ÷ $450,000 = 4.00 times c. Net margin=Net income ÷ Total net sales =($2,400,000 - $1,810,000) ÷ $2,400,000 = 24.58%

The recognition of an expense may be accompanied by which of the following? A. An increase in liabilities B. A decrease in liabilities C. A decrease in revenue D. An increase in assets

A. An increase in liabilities

When Crossett Corporation was organized in January, Year 1, it immediately issued 4,000 shares of $50 par, 6 percent, cumulative preferred stock and 50,000 shares of $20 par common stock. Its earnings history is as follows: Year 1, net loss of $35,000; Year 2, net income of $125,000; Year 3, net income of $215,000. The corporation did not pay a dividend in Year 1. How much is the dividend arrearage as of January 1, Year 2?

A. Dividend Arrearage: $12,000 Par value of stock=$50x6% dividend= $3.00 dividend per share x 4,000 preferred shares outstanding= total dividends per year of $12,000

Blake Company purchased two identical inventory items. The item purchased first cost $18.00, and the item purchased second cost $19.00. Blake sold one of the items for $32.00. Which of the following statements is true? A. Ending inventory will be lower if Blake uses the weighted average cost flow method than if the FIFO cost flow method was used. B. Cost of goods sold will be higher if Blake uses the FIFO cost flow method than if weighted average cost flow method was used. C. The dollar amount assigned to ending inventory will be the same no matter which cost flow method is used. D. Gross margin will be higher if Blake uses LIFO than it would be if FIFO were used.

A. Ending inventory will be lower if Blake uses the weighted average cost flow method than if the FIFO cost flow method was used. If Blake uses weighted average, ending inventory will be $18.50. The weighted average method calculates an average cost of inventory ($18 + $19 = $37; $37/2 units = $18.50 average cost per unit). If the company uses FIFO, ending inventory will be $19. The FIFO method assumes that inventory purchased first is sold first. Therefore, the item purchased first costing $18 will be sold first and the item costing $19 will remain in ending inventory.

The shirt shop had the following transactions for T-shirts for Year 1, its first year of operations: Jan. 20: Purchased 400 units @ $8=$3,200 Apr. 21 Purchased 200 units @ $10 = $2,000 July 25 Purchased 280 units @ $13 = $3,640 Sept. 19 Purchased 90 units @ $15 = $1,350 During the year, The Shirt Shop sold 810 T-Shirts for $20 each A. Compute the amount of ending inventory The Shirt Shop would report on the balance sheet, assuming the following cost flow assumptions: (1) FIFO, (2) LIFO, and (3) weighted average. B. Compute the difference in gross margin between the FIFO and LIFO cost flow assumptions.

A. Ending inventory; FIFO: $2,260, LIFO: $1,280, Weighted average: $1,682 B. Gross Margin; FIFO: $8,270, LIFO: $7,290, Difference: $980 Total amount of purchased units= 970(400+200+280+90), Total cost= $10,190 ($3,200+$2,000+$3,640+$1,350) FIFO 1. Subtract 970 from 810 2. Ending inventory From Sept. 19 Purchased 90 units @ $15=$1,350 From July 25 Purchased 70 units @ $13 = $910 3. $910= $1,350=$2,260 LIFO 1. Ending inventory from Jan. 20 Purchased 160 units @ $8= $1,280 Weighted Average 1. $10,190 total cost/970 total units= $10.51 2. 160 units @ $10.51= $1,681.60 B. FIFO Sales (810 units @ $20)= $16,200 Cost of goods available for sale: $10,190 Less: Ending inventory: -$2,260 (Ending inventory) Cost of goods sold: -$7,930 Gross Margin = $16,200-$7,930= $8,270 LIFO Sales (810 units @ $20)= $16,200 Cost of goods available for sale: $10,190 Less: Ending inventory: -$1,280 (Ending inventory) Cost of goods sold: -$8,910 Gross Margin = $16,200-$8,910= $7,290 Difference: $8,270-$7,290=$980

If prices are rising, which inventory cost flow method will produce the lowest amount of cost of goods sold? A. FIFO B. LIFO C. Weighted average D. LIFO, FIFO, and weighted average will all produce equal amounts.

A. FIFO When prices are rising, FIFO will produce the lowest cost of goods sold compared with other methods because it is based on the earliest, lowest priced, purchases.

Jack's snow removal company received a cash advance of $14,700 on December 1, year 1 to provide services during the months of December, January, and February. The year-end adjustment on December 31, year 1, to recognize the partial expiration of the contract will: A. Increase stockholders' equity by $4,900 B. Increase assets by $4,900 C. Increase liabilities by $4,900 D. Increase assets by $4,900 and increase stockholders' equity by $4,900

A. Increase stockholders' equity by $4,900

Dan Dayle started a business by issuing an $80,000 face value note to First State Bank on January 1, Year 1. The note had an 8 percent annual rate of interest and a five-year term. Payments of $20,037 are to be made each December 31 for five years. Required What portion of the December 31, Year 1, payment is applied to interest expense and principal? What is the principal balance on January 1, Year 2? What portion of the December 31, Year 2, payment is applied to interest expense and principal?

A. Interest expense: $6,400 Principal: $13,637 B. Principal balance: $66,363 C. Interest expense: $5,309 Principal: $14,728 $80,000, 5-Yr. Term Note, 8% Interest Rate Year 1: Prin. Bal. on Jan. 1:$80,000 Cash Pay. Dec. 31: $20,037 Applied to Interest: $6,400 Applied to Principal: $13,637 Prin. Bal. End of Period: $66,363 Year 2: Prin. Bal. on Jan. 1: $66,363 Cash Pay. Dec. 31: $20,037 Applied to Interest:$5,309 Applied to Principal: $14,728 Prin. Bal. End of Period: $51,635

Bill Darby started Darby Company on January 1, Year 1. The company experienced the following events during its first year of operation: Earned $16,200 of cash revenue. Borrowed $12,000 cash from the bank. Adjusted the accounting records to recognize accrued interest expense on the bank note. The note, issued on September 1, Year 1, had a one-year term and an 8 percent annual interest rate. What is the amount of interest expense in Year 1? What amount of cash was paid for interest in Year 1?

A. Interest expense:$320 B Amount of cash: 0 $12,000 × 8% = $960; $960 × 4/12 = $320b.$0, no interest was paid in Year 1; interest will be paid in Year 2.

The following information pertains to JAE Corp. at January 1, Year 2: Common stock, $10 par, 20,000 shares authorized, 2,000 shares issued and outstanding$20,000 Paid-in capital in excess of par, common stock 15,000 Retained earnings 82,000 JAE Corp. completed the following transactions during Year 2: Issued 3,000 shares of $10 par common stock for $25 per share. Repurchased 500 shares of its own common stock for $26 per share. Resold 200 shares of treasury stock for $30 per share. How many shares of common stock were outstanding at the end of the period? How many shares of common stock had been issued at the end of the period?

A. Outstanding shares at the end of the period: 4,700 B. Issued shares at the end of the period: 5,000

Which of the following is not a product coast? A. Transportation cost on goods delivered to customers B. Cost of merchandise purchased for resale C. Transportation cost on merchandise purchased from suppliers D. All of the choices are product costs

A. Transportation cost on goods delivered to customers

On June 30, Year 3, Franza Company's total current assets were $900,000 and its total current liabilities were $360,000. On July 1, Year 3, Franza issued a short-term note to a bank for $72,000 cash. a. Compute Franza's working capital before and after issuing the note. b. Compute Franza's current ratio before and after issuing the note.

A. Working capital before transaction: $540,000 Working capital after transaction: $540,000 a. Working capital before the transaction: Current assets − Current liabilities = $900,000 − $360,000 = $540,000 Working capital after the transaction: Current assets − Current liabilities = $972,000 − $432,000 = $540,000 B. Current ratio before the transaction: 2.50 After the transaction: 2.25 b.Current ratio before the transaction: Current assets ÷ Current liabilities = $900,000 ÷ $360,000 = 2.50:1 Current ratio after the transaction: Current assets ÷ Current liabilities = $972,000 ÷ $432,000 = 2.25:1

On June 30, Year 3, Franza Company's total current assets were $900,000 and its total current liabilities were $360,000. On July 1, Year 3, Franza issued a long-term note to a bank for $72,000 cash. a. Compute Franza's working capital before and after issuing the note. b. Compute Franza's current ratio before and after issuing the note.

A. Working capital before transaction: $540,000 Working capital after transaction: $612,000 a. Working capital before the transaction: $900,000 − $360,000 = $540,000 Working capital after the transaction: $972,000 − $360,000 = $612,000 B. Current ratio before the transaction: 2.5 After the transaction: 2.7 b.Current ratio before the transaction: $900,000 ÷ $360,000 = 2.5:1 Current ratio after the transaction: $972,000 ÷ $360,000 = 2.7:1

The year-end adjusting entry to recognize uncollectible accounts expense will: A. decrease assets and decrease stockholders' equity. B. increase assets and decrease stockholders' equity. C. increase liabilities and increase stockholders' equity. D. decrease liabilities and increase stockholders' equity.

A. decrease assets and decrease stockholders' equity. The adjusting entry will decrease assets by increasing the contra asset allowance for doubtful accounts and will increase uncollectible accounts expense, which decreases stockholders' equity.

The net effect of the entries to recognize the receipt of a previously written-off account under the allowance method is to: A. have no effect on total assets or stockholders' equity. B. increase total stockholders' equity only. C. decrease total assets. D. increase total assets and stockholders' equity.

A. have no effect on total assets or stockholders' equity. When a company receives payment on a previously written-off account, it must first reinstate the written-off account. The reinstatement increases assets (accounts receivable) and decreases assets (increases the contra asset allowance for doubtful accounts), with no overall effect on the financial statements. Next, the company records collection of the receivable, which increases assets (cash) and decreases assets (accounts receivable), again with no overall effect on assets. The event is reported as a cash inflow for operating activities on the statement of cash flows.

Use the following account numbers and corresponding account titles to answer the following question. 1. Cash 2. Merchandise inventory 3. Cost of goods sold 4. Transportation out 5. Dividends 6. Common stock 7. Selling expense 8. Loss on sale of land 9. Sales revenue Which accounts would affect the amount of net income shown on the income statement?

Account numbers 3, 4, 7, 8, and 9

On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method of accounting for uncollectible accounts. In February of Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. Which of the following answers correctly states the effect of recording the collection of the reestablished receivable on April 4, Year 2? Assets 1,050 (1,050)=Liabilities (n/a) + stockholders equity (n/a)

Assets 1,050 (1,050)=Liabilities (n/a) + stockholders equity (n/a) This is an asset exchange transaction. Once the receivable is reestablished, collection of the receivable is recorded as an increase to assets (cash) and a decrease to assets (accounts receivable), resulting in no net effect to assets. It is reported as a cash inflow for operating activities.

Retained earnings at the beginning and end of the period were $600 and $1,300 respectively. If revenues were $2,300 and dividends paid to stockholders were $500, what was the amount of expenses for the period? A. $1,600 B. $1,100 C. $1,800 D. $700

B. $1,100 Beginning retained earnings of $600+ revenues of $2,300-expenses- dividends of $500= ending retained earnings of $1,300 Expenses =$1,100

On January 1, Year 1, Friedman Company purchased a truck that cost $53,000. The truck had an expected useful life of 100,000 miles over 8 years and a $9,000 salvage value. During Year 2, Friedman drove the truck 28,000 miles. The company uses the units-of-production method. The amount of depreciation expense recognized in Year 2 is: A. $14,840. B. $12,320. C. $5,500. D. $6,625.

B. $12,320 ($53,000 − $9,000) ÷ 100,000 miles = $0.440 per mile depreciation expense; 28,000 miles × $0.440 per mile = $12,320 depreciation expense in Year 2.

The inventory records for Radford Company reflected the following Beginning inventory on May 1: 100 units @ $4.00 First purchase on May 7: 300 units @ $4.40 second purchase on May 17: 500 units @ $4.60 Third purchase on May 23: 100 units @ $4.80 Sales on May 31: 900 units @ $7.80 What is the weighted average cost per unit for May? A. $4.45 B. $4.50 C. $5.12 D. $6.34

B. $4.50 Weighted average cost per unit = [(100 × $4.00) + (300 × $4.40) + (500 × $4.60) + (100 × $4.80)] ÷ 1,000 units = $4.50 per unit

Laramie Company paid $2,200,000 for a purchase that included land, building, and office furniture. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Land, $644,000, Building, $874,000, and Office Furniture, $782,000. Based on this information the cost that would be allocated to the land is: A. $435,680. B. $616,000. C. $644,000. D. $765,990.

B. $616,000. The total price of a basket purchase must be allocated among the assets acquired. Accountants commonly allocate the purchase price using the relative fair market value method. Percentage allocated to building = Appraised amount for land of $644,000 ÷ Total appraised values of $2,300,000 (or $644,000 + $874,000 + $782,000) = 28%; Allocation of actual purchase price to land = Total purchase price of $2,200,000 purchase price × 28% = $616,000.

Alpha Associates was organized on January 1, Year 1. Alpha was organized as a corporation. Alpha reported $200,000 of before tax income during Year 1 and paid a $30,000 cash dividend to its stockholders. Assuming a corporate income tax rate of 30% and a personal income tax rate of 15%, the total amount of tax collected by the government is A. $60,000. B. $64,500. C. $69,000. D. $90,000.

B. $64,500. The government would collect $60,000 ($200,000 × .30) from the corporation and $4,500 ($30,000 × .15) from the stockholders. Therefore, the total tax collected by the government is $64,500 ($60,000 + $4,500). The corporate form of business structure results in double taxation. The income is taxed first at the corporate level and then again at the personal level when dividends are paid to the owners.

The following account balances were drawn from the financial statements of Grayson Company: Cash: $5,000 Accounts receivable: $2,100 Land: $8,600 Accounts payable: $1,550 Common Stock: ? Retained earnings, Jan.1:$3,300 Revenue: $10,100 Expenses: $7,550 Based on the above information, what is the balance of common stock for Grayson company? A. $10,850 B. $8,300 C. $750 D. $11,000

B. $8,300 Assets ($5,000 +$2,100 =$8,600) =liabilities ($1,550)+ stockholders' equity; stockholders equity = $14,150; $14,150= common stock + retained earnings ($3,300+$10,100-$7,550); $14,150= common stock+ $5,850; common stock= $8,300

Assume the perpetual inventory method is used. 1. The company purchased $12,800 of merchandise on account under terms 2/10, n/30. 2. The company returned $2,300 of merchandise to the supplier before payment was made 3. The liability was paid within the discount period 4. All of the merchandise purchased was sold for $19,600 cash The amount of gross margin from the four transactions is: A. $6,664 B. $9,310 C. $6,800 D. $9,356

B. $9,310 Cost of goods sold= ($12,800-$2,300)x0.98=$10,290 Sales revenue $19,600-cost of goods sold $10,290=$9,310

Which of the following is considered a period cost? A. Transportation costs on goods received from suppliers B. Advertising expense for the current month C. Cost of merchandise purchased D. None of the above

B. Advertising expense for the current month

Which one of the following is not an accurate description of the Allowance for Doubtful Accounts? A. The account is a contra asset account. B. The account is a liability. C. The amount of the Allowance for Doubtful Accounts decreases the net realizable value of a company's receivables. D. The account is increased when the company's' estimate of uncollectible accounts expense is recorded.

B. The account is a liability. Allowance for doubtful accounts is a contra asset account that decreases the net realizable value of receivables that is shown on the balance sheet. The Allowance for doubtful accounts is increased when a company estimates uncollectible accounts expense.

Which of the following would be classified as a long-term operational asset? A. Notes receivable B. Trademark C. Inventory D. Accounts receivable

B. Trademark A trademark is an intangible long-term operational asset. While notes receivable could be long-term, it is not considered an operational asset. Inventory and accounts receivable are current assets.

Hoover Company purchased two identical inventory items. The item purchased first cost $33.00. The item purchased second cost $35.00. Then Hoover sold one of the inventory items for $62.00. Based on this information, the amount of: A. ending inventory is $35.00 if Hoover uses the LIFO cost flow method. B. gross margin is $28.00 if Hoover uses the weighted average cost flow method. C. cost of goods sold is $35.00 if Hoover uses the FIFO cost flow method. D. cost of goods sold is $33.00 if Hoover uses the LIFO cost flow method.

B. gross margin is $28.00 if Hoover uses the weighted average cost flow method. If Hoover uses LIFO, cost of goods sold will be $35.00 (most recent purchase) and ending inventory will be $33.00, not $35.00. If Hoover uses weighted average, the weighted average cost per unit is $34.00. Therefore, gross margin will be $28.00 ($62.00 Sales − $34.00 Cost of goods sold). If Hoover uses FIFO, cost of goods sold will be $33.00 (earliest purchase), not $35.00.

Hoover Company purchased two identical inventory items. The item purchased first cost $37.00. The item purchased second cost $41.25. Then Hoover sold one of the inventory items for $75. Based on this information, the amount of: A. ending inventory is $41.25 if Hoover uses the LIFO cost flow method. B. gross margin is $35.88 if Hoover uses the weighted average cost flow method. C. cost of goods sold is $41.25 if Hoover uses the FIFO cost flow method. D. cost of goods sold is $37.00 if Hoover uses the LIFO cost flow method.

B. gross margin is $35.88 if Hoover uses the weighted average cost flow method. If Hoover uses LIFO, cost of goods sold will be $41.25 (most recent purchase) and ending inventory will be $37.00, not 41.25. If Hoover uses weighted average, the weighted average cost per unit is $39.12. Therefore, gross margin will be $35.88 ($75 Sales − $39.12 Cost of goods sold). If Hoover uses FIFO, cost of goods sold will be $37.00 (earliest purchase), not $41.25.

On January 1, Year 1, Dinwiddie Company purchased a car that cost $45,000. The car had an expected useful life of 6 years and a $10,000 salvage value. Based on this information alone: A. the total amount of depreciation expense recognized over the six-year useful life will be greater under the double-declining-balance method than the straight-line method. B. the amount of depreciation expense recognized in Year 4 would be greater if Dinwiddie depreciates the car under the straight-line method than if the double-declining-balance method is used. C. at the end of Year 3, the amount in the accumulated depreciation account will be less if the double-declining-balance method is used than it would be if the straight-line method is used. D. None of these statements is true.

B. the amount of depreciation expense recognized in Year 4 would be greater if Dinwiddie depreciates the car under the straight-line method than if the double-declining-balance method is used. In Year 4, the fourth year of the car's 6-year useful life, straight-line depreciation will produce greater depreciation expense. Double-declining-balance recognizes greater depreciation expense in the asset's early life, and lower depreciation expense in the asset's later life. The fourth of six years is during the latter part of the asset's life.

Stosch Company's balance sheet reported assets of $47,000, liabilities of $16,000 and common stock of $13,000 as of December 31, year 1. If retained earnings on the balance sheet as of December 31, year 2, amount to $22,000 and Stosch paid a $15,000 dividend during Year 2, then the amount of net income for year 2 was which of the following? A. $4,000 B. $19,000 C. $18,000 D. $15,000

B.$19,000 Retained earnings Year 1: $47,000-$16,000-$13,000=$18000in retained earnings for year 1. Year 2 retained earnings amount to $22,000 so $22,000-$18,000=$4,000 $4,000+$15,000 dividend paid=$19,000 net income

Elroy Corporation repurchased 4,000 shares of its own stock for $30 per share. The stock has a par of $10 per share. A month later Elroy resold 900 shares of the treasury stock for $32 per share. What is the balance of the Treasury Stock account after these transactions are recognized?

Balance of treasury stock: $93,000 Purchase: 4,000 × $30 = $120,000 Sale: 900 × $32 = $28,800 (Stock is removed from the Treasury stock account at the purchase amount; any difference is shown in Paid in Capital in Excess of Cost - Treasury Stock) Treasury stock 1. $120,000 2. ($27,000) Bal. $93,000 *900 shares × $30 = $27,000

Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1) Acquired $1,550 cash from the issue of common stock. 2) Borrowed $1,020 from a bank. 3) Earned $1,200of revenues cash. 4) Paid expenses of $370. 5) Paid a $170 dividend. During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.) 1) Issued an additional $925 of common stock. 2) Repaid $640 of its debt to the bank .3) Earned revenues of $1,350 cash. 4) Incurred expenses of $600. 5) Paid dividends of $220. Packard Company's net cash flow from financing activities for Year 2 is: A) $640 net outflow B) $860 net outflow C) $65 net inflow D) $705 net inflow

C) $65 net inflow Net inflow from financing activities= inflow from issuance of $925-outflow of loan repayment $640-outflow for dividends of $220=$65

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,425,000. Harding paid $350,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $370,000; Building, $1,100,000 and Equipment, $730,000. Assume that Harding uses the units-of-production method when depreciating its equipment. Harding estimates that the purchased equipment will produce 1,050,000 units over its 5-year useful life and has salvage value of $17,000. Harding produced 270,000 units with the equipment by the end of the first year of purchase. Which amount below is closest to the amount Harding will record for depreciation expense for the equipment in the first year? A. $187,714 B. $97,714 C. $116,550 D. $183,343

C. $116,550 Percent of purchase price to be allocated to equipment = (Appraised value of equipment of $730,000 ÷ Total appraised value of $2,200,000 (or $370,000 + $1,100,000 + $730,000) = 33%; Cost of equipment = Purchase price of $1,425,000 × 33% = $470,250; Cost per unit of production = (Cost of equipment of $470,250 − Salvage value of $17,000) ÷ Productive capacity of 1,050,000 units = $0.4317 per unit; Year 1 depreciation = $0.4317 per unit × 270,000 units = $116,550

On January 1, Year 2, Grande Company had a $16,000 balance in the accounts receivable account and a zero balance in the allowance for doubtful accounts account. During year 2, Grande recognized $104,000 of service revenue earned on account. The company collected $97,000 cash from accounts receivable. Uncollectible accounts are estimated to be 2% of sales on account. The amount of uncollectible accounts expense recognized on the year 2 statement is: A. $320 B. $1,000 C. $2,080 D. $1,940

C. $2,080 $104,000 sales on account x 2%= $2,080 uncollectible accounts expense

Warren Enterprises had the following events during Year 1: 1. The business issued $23,000 of common stock to its stockholders 2. The business purchased land for $15,000 cash 3. Services were provided to customers for $19,000 cash 4. Services were provided to customers for $8,000 on account 5. The company borrowed $19,000 from the bank 6. Operating expenses of $15,000 were incurred and paid in cash 7. Salary expense of $1,100 was accrued 8. A dividend of $7,000 was paid to the stockholders of Warren Enterprises Assuming the company began operations during year 1, what is the amount of retained earnings as of December 31, year 1? A. $13,900 B. $27,000 C. $3,900 D. $3,700

C. $3,900 $0 beginning balance+ $27,000 revenue- $16,100 expenses- $7,000 dividends= $3,900 ending balance

Crowe Company began operations on January 1, Year 1. The company was organized as a sole proprietorship. During Year 1, Crowe acquired $40,000 of capital from John Crowe, the owner. Also, during Year 1 the company earned net income of $20,000 and John Crowe withdrew $15,000 from the business. Based on this information, the Company would show A. $5,000 in its capital account on the Year 1 balance sheet. B. $40,000 in its capital account on the Year 1 balance sheet. C. $45,000 in its capital account on the Year 1 balance sheet. D. $25,000 in its capital account on the Year 1 balance sheet.

C. $45,000 in its capital account on the Year 1 balance sheet. The ending balance in the capital account is $45,000 (Zero Beginning capital balance + $40,000 Owner investment + $20,000 Net income - $15,000 Withdrawal).

Which of the following items would appear in the financing activities section of the statement of cash flows? A. Cash outflow for the purchase of land B. Cash inflow from sales revenue C. Cash inflow from issuance of common stock D. Cash outflow for the payment of accounts payable

C. Cash inflow from issuance of common stock Financing activities include obtaining cash from owners or paying cash to owners.

Which of the following items is an example of revenue? A. Cash received from a bank loan B. Cash received from investors from the sale of common stock C. Cash received from customers at the time services were provided D. Cash received from the sale of land for its original selling price

C. Cash received from customers at the time services were provided

If total assets decrease, then which of the following is true? A. Liabilities must increase and retained earnings must decrease B. Common stock must decrease and retained earnings must increase C. Liabilities, common stock, or retained earnings must decrease D. Liabilities, common stock, or retained earnings must increase

C. Liabilities, common stock, or retained earnings must decrease

Which of the following statements about types of business entities is true? A. For accounting purposes a sole proprietorship is not a separate entity from its owner. B. Ownership in a partnership is represented by having shares of capital stock. C. One advantage of a corporation is ability to raise capital. D. Sole proprietorships are subject to double taxation.

C. One advantage of a corporation is ability to raise capital. Corporations are more able to raise capital because they can issue common stock to a large number of potential investors.

Which of the following events would not require an end of year adjusting entry? A. Purchasing supplies for cash B. Paying for one years rent on July 1 C. Providing services for cash D. Each of these answer choices would require an end of year adjusting entry

C. Providing services for cash This transaction would be recorded when the cash is received at the time the service is provided. Supplies and prepaid rent both require end of year adjusting entries to recognize expense

Which of the following first required corporations to file quarterly and annual financial statements that are prepared in accordance with Generally Accepted Accounting Principles? A. Securities Act of 1933 B. Sarbanes Oxley Act C. Securities Act of 1934 D. Fair Disclosure Act

C. Securities Act of 1934

A strong set on internal controls is designed to minimize which of the following factors that motivate fraud? A. Pressure B. Rationalization C. Opportunity

C. opportunity If there is no opportunity to commit fraud, pressure and rationalization are rendered useless.

Flagler Corporation shows a total of $660,000 in its common stock account and $1,600,000 in its paid-in capital in excess of par value − common stock account. The par value of Flagler's common stock is $8. How many shares of Flagler stock have been issued? A.$117,500 B. $200,000 C.$82,500 D. It cannot be determined

C.$82,500 $660,000 total par value ÷ $8 par value per share = 82,500 shares issued

Jones Co. started the year with no inventory. During the year, it purchased two identical inventory items at different times. The first purchase cost $1,060 and the other, #1,380. Jones sold one of the items during the year. Based on the information, how much product cost would be allocated to cost of goods sold and ending inventory on the year-end financial statements, assuming use of the following cost flow assumptions: FIFO, LIFO, Weighted average

Cost of goods sold FIFO: $1,060 LIFO: $1,380 Weighted Average: $1,220 Ending Inventory FIFO: $1,380 LIFO: $1,060 Weighted Average: $1,220

Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 100 units at $60 per unit. During the year, Cortez made two batch purchases of this chair. The first was a 150 unit purchase at $68 per unit; The second was a 200-unit purchase at $72 per unit. During the period, it sold 270 chairs. Determine the amount pf product costs that would be allocated to cost of goods sold and ending inventory, assuming that Cortez uses FIFO, LIFO, and weighted average.

Cost of goods sold FIFO: $17,640 LIFO: $19,160 Weighted Average: $18,360 Ending Inventory: FIFO: $12,960 LIFO: $11,440 Weighted average: $12,240 Total inventory = 450 (100+150+200) and total cost= $30,600 A. cost of goods sold: FIFO from beginning inventory, 100 units purchased @ $60= $6,000 From first purchase, 150 units purchased @ $68= $10,200 From second purchase, 20 units @ $72= $1,440. Total is 270 chairs for $17,640. LIFO From second purchase, 200 units @ $72= $14,400 From first purchase, 70 units @ $68= $4,760 Total is 270 units at $19,160 Ending Inventory FIFO: From second purchase, 180 units @ $72= $12,960 LIFO: From beginning inventory, 180 units @ $60= $6,000 From first purchase, 80 units @ $68= $5,440 Total= $6,000+$5,440=$11,440 Weighted average: Total cost= $30,600/ 450 total units= $68 Cost of goods sold= 270 units @$68= $18,360 Ending Inventory= 180 units @ $68= $12,240

Revenue on account amounted to $5,400. cash collections of accounts receivable amounted to $3,350. Expenses for the period were $2,800. The company paid dividends of $800. What was the amount of net income for the period? A. $550 B. $1,800 C. $2,550 D. $2,600

D. $2,600 Net income= revenue of $5,400- expenses of $2,800= $2,600

The inventory records for Radford Company reflected the following Beginning inventory on May 1: 100 units @ $4.00 First purchase on May 7: 300 units @ $4.40 second purchase on May 17: 500 units @ $4.60 Third purchase on May 23: 100 units @ $4.80: Sales on May 31: 900 units @ $7.80 What is the amount of gross margin assuming the weighted average cost flow method is used? A. $3,015 B. $2,412 C. $1,314 D. $2,970

D. $2,970 Under the weighted-average method, the average cost of inventory is reported on both the income statement and the balance sheet. Weighted average cost per unit = [(100 × $4.00) + (300 × $4.40) + (500 × $4.60) + (100 × $4.80)] ÷ 1,000 units = $4.50 per unit; Gross margin = Sales of (900 × $7.80) − Cost of goods sold of (900 × $4.50) = $2,970.

On January 1, year 2, the accounts receivable balance was $37,000 and the balance in the allowance for doubtful accounts was $2,800. On January 15, Year 2, an $800 uncollectible account was written off. The net realizable value of accounts receivable immediately after the write-off is: A. $36,200 B. $33,400 C. $35,000 D.$34,200

D. $34,200 $37,000-$800=$36,200 accounts receivable balance after the write-off; $2,800-$800=$2,000 allowance balance after the write-off; $36,200-$2,000= $34,200 net realizable value after the write-off.

On January 1, Year 1, Friedman Company purchased a truck that cost $56,000. The truck had an expected useful life of 8 years and a $9,000 salvage value. The company uses the double-declining balance method. The book value of the truck at the end of Year 1 is: A. $33,000. B. $44,250. C. $35,250. D. $42,000.

D. $42,000. $56,000 × (2 × 12.5%) = $14,000 Depreciation expense for Year 1; $56,000 Cost − $14,000 Accumulated depreciation at end of Year 1 = $42,000 book value at the end of Year 1

Crowe Company began operations on January 1, Year 1. The company was organized as a sole proprietorship. During Year 1, Crowe acquired $50,000 of capital from John Crowe, the owner. Also, during Year 1 the company earned net income of $20,000. Based on this information, Crowe can withdraw (assume all transactions are cash transactions) A. $20,000 from the business. B. $30,000 from the business. C. $50,000 from the business. D. $70,000 from the business.

D. $70,000 from the business. Unlike dividends, withdrawals are not limited by retained earnings. The earnings and contributed capital are combined in a single account and the owner can withdraw any amount including 100% of the capital from the business at any time it is deemed desirable to do so.

Anton Company uses the perpetual inventory method. Anton purchased 1,120 units of inventory that cost $5 each. At a later date the company purchased an additional 1,140 units of inventory that cost $7 each. If Anton uses the FIFO cost flow method and sells 1,600 units of inventory, the amount of cost of goods sold will be: A. $11,200 B. $8,000 C. $11,180 D. $8,960

D. $8,960 Under FIFO, the cost of the items purchased first is reported on the income statement, and the cost of the items purchased last is reported on the balance sheet. Cost of goods sold = (1,120 × $5) + (480 × $7) = $8,960

Anton Company uses the perpetual inventory method. Anton purchased 400 units of inventory that cost $12.00 each. At a later date the company purchased an additional 600 units of inventory that cost $16.00 each. If Anton uses the FIFO cost flow method and sells 700 units of inventory, the amount of cost of goods sold will be: A. $11,200 B. $10,400 C. $8,400 D. $9,600

D. $9,600 Under FIFO, the cost of the items purchased first is reported on the income statement, and the cost of the items purchased last is reported on the balance sheet. Cost of goods sold = (400 × $12.00) + (300 × $16.00) = $9,600

Which of the following reflects the effect of the year-end adjusting entry to record estimated uncollectible accounts expense using the allowance method? A. Assets (-)=Liabilities (n/a) + stockholders equity (-) B. Assets (n/a)=Liabilities (-) + stockholders equity (-) C.Assets (n/a)=Liabilities (-) + stockholders equity (-) D. Assets (-)=Liabilities (n/a) + stockholders equity (-)

D. Assets (-)=Liabilities (n/a) + stockholders equity (-) Recording uncollectible accounts expense decreases assets (by reducing the net realizable value of receivables) and decreases stockholders' equity (retained earnings). On the income statement, it increases expenses, which decreases net income. It does not affect the statement of cash flows.

Greg Company recognized revenue on account. Which of the following financial statements are affected by this accounting event? A. Balance sheet B. Income statement C. Statement of cash flows D. Income statement and the balance sheet

D. Income statement and the balance sheet

Which of the following is not considered an advantage of the corporate form of business organization? A. Ability to raise capital. B. Continuity of existence. C. Ease of transferability of ownership. D. Lack of government regulation.

D. Lack of government regulation. The large amount of government regulation is a disadvantage of the corporate form of business.

Crowe Company began operations on January 1, Year 1. The company was organized as a sole proprietorship. During Year 1, Crowe acquired $40,000 of capital from John Crowe, the owner. Also, during Year 1 the company earned net income of $20,000 and John Crowe withdrew $15,000 from the business. Based on this information, the Company would show A. $5,000 of retained earnings on its Year 1 balance sheet. B. $5,000 of retained earnings on its Year 1 balance sheet. C. $60,000 of retained earnings on its Year 1 balance sheet. D. None of the answers is correct.

D. None of the answers is correct. Proprietorships do not have a retained earnings account. Instead, retained earnings are included in the capital account.

On January 2, Year 1, Torres Corporation issued 20,000 shares of $10 par-value common stock for $11 per share. Which of the following statements is true? A. The common stock account will increase by $220,000. B. The cash account will increase by $200,000. C. Total stockholders' equity will increase by $200,000. D. The paid-in capital in excess of par value account will increase by $20,000.

D. The paid-in capital in excess of par value account will increase by $20,000. The cash account will increase by $220,000 (20,000 × $11), the common stock account will increase by $200,000 (20,000 × $10 par value), and the paid-in capital in excess of par value account will increase by $20,000 (20,000 × $1).

Product costs are matched against sales revenue: A. In the period immediately following purchase B. In the period immediately following the sale C. When the merchandise is purchased D. When the merchandise is sold

D. When the merchandise is sold

The amount of accounts receivable that is actually expected to be collected is known as the: A. allowance for doubtful accounts. B. uncollectible accounts expense. C. present value of accounts receivable. D. net realizable value.

D. net realizable value. Net realizable value is calculated as the accounts receivable balance (what has been billed to customers, but not yet collected) minus allowance for doubtful accounts (the estimate of what a company believes is uncollectible).

Barker Company paid cash to purchase two identical inventory items. The first purchase cost $18.00 cash and the second cost $20.00 cash. Barker sold one inventory item for $30.00 cash. Based on this information alone, without considering the effect of income taxes, the cash flow from operating activities is: A. $11.00 assuming a weighted average cost flow method is used. B. $12.00 assuming the FIFO cost flow method is used. C. $10.00 assuming the LIFO cost flow method is used. D. not affected by the cost flow method chosen.

D. not affected by the cost flow method chosen. Regardless of the cost flow method chosen, Barker will report an operating cash outflow of $38.00 for the purchases of the two items and an operating cash inflow of $30.00 for the sale of one item.

Based on the fraud triangle, which is not a factor that motivates fraud? A. Opportunity B. Pressure C. Rationalization D. Punishment

D. punishment Punishment is a deterrent not a motivator of fraud. The fraud triangle seeks to identify the factors that motivate unethical conduct.

Perpetual Inventory method:

Perpetual inventory is a method of accounting for inventory that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.

Partnerships are frequently managed by the owners of the business. This statement is TRUE FALSE

TRUE Many professionals such as doctors, lawyers, and accountants organize their practices as partnerships. The professionals not only own a part of the business but also participate in managing the organizations.

In a business organized as a sole proprietorship, retained earnings and capital acquired from owners are combined is a single account. This statement is TRUE FALSE

TRUE The proprietorship form of business organization does not distinguish between retained earnings and capital collected from owners. Both sources of assets are shown in a single account called owner capital.

The inventory records for Radford Company reflected the following Beginning inventory on May 1 300 units @ $2.20 First purchase on May 7 400 units @ $2.40 second purchase on May 17 600 units @ $2.50 Third purchase on May 23 200 units @ $2.60 Sales on May 31 1,200 units @ $4.10 What is the weighted average cost per unit for May? a)$2.43 b)$2.39 c)$2.48 d)$4.10

Weighted average cost per unit = [(300 × $2.20) + (400 × $2.40) + (600 × $2.50) + (200 × $2.60)]/1,500 units = $2.43 per unit

The Miller Company recognized $101,000 of service revenue earned on account during Year 2. There was no beginning balance in the accounts receivable and allowance accounts. During Year 2, Miller collected $71,000 of cash from accounts receivable. The company estimates that it will be unable to collect 3% of its sales on account. The net realizable value of Miller's receivables at the end of Year 2 was: a)$26,970. b)$27,870. c)$33,030. d)$30,000.

a) $26,970. $0 beginning balance + $101,000 revenue on account − $71,000 collections = $30,000 ending accounts receivable balance; $0 beginning balance + $3,030 uncollectible accounts expense − $0 write-offs = $3,030 ending allowance for doubtful accounts balance; $30,000 − $3,030 = $26,970 net realizable value

On January 1, Year 1, Missouri Company purchased a truck that cost $57,000. The truck had an expected useful life of 10 years and a $6,000 salvage value. The amount of depreciation expense recognized in Year 2 assuming that Missouri uses the double declining-balance method is: a)$9,120. b)$11,400. c)$10,200. d)$8,160.

a) $9,120. $57,000 × (2 × 10%) = $11,400 depreciation expense in Year 1. ($57,000 − $11,400) × (2 × 10%) = $9,120 depreciation expense in Year 2.

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $71,000 and $2,900, respectively. During the year Kincaid reported $190,000 of credit sales. Kincaid wrote off $1,750 of receivables as uncollectible in Year 2. Cash collections of receivables amounted to $227,700. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales. The amount of uncollectible accounts expense recognized in the Year 2 income statement will be: a)$1,900 b)$2,277 c)$710 d)$3,050

a)$1,900. $190,000 credit sales × 1% = $1,900 uncollectible accounts expense

On January 1, Year 2, Grande Company had a $72,400 balance in the Accounts Receivable account and a $3,200 balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $197,000 recognized service revenue on account. The company collected $239,900 cash from accounts receivable. Uncollectible accounts are estimated to be 1% of sales on account. The amount of uncollectible accounts expense recognized on the Year 2 income statement is: a)$1,970. b)$724. c)$2,399. d)$1,850.

a)$1,970. $197,000 sales on account × 1% = $1,970 uncollectible accounts expense

Beginning inventory on May 1 500 units @ $2.60 First purchase on May 7 600 units @ $2.80 Second purchase on May 17 800 units @ $2.90 Third purchase on May 23 400 units @ $3.00 Sales on May 31 1,800 units @ $4.50 What is the amount of cost of goods sold assuming the LIFO cost flow method is used? a)$5,200 b$5,400 c)$5,040 d)$4,680

a)$5,200 Under LIFO, the cost of the items purchased last is reported on the income statement, and the cost of the items purchased first is reported on the balance sheet. Cost of goods sold = (400 × $3.00) + (800 × $2.90) + (600 × $2.80) = $5,200

Uno Company sold office equipment with a cost of $23,000 and accumulated depreciation of $12,000 for $14,000. Required a)What is the book value of the asset at the time of sale? b)What is the amount of gain or loss on the disposal? (Loss amount should be indicated with a minus sign.) c)How would the sale affect net income (increase, decrease, no effect) and by how much? d)How would the sale affect the amount of total assets shown on the balance sheet (increase, decrease, no effect) and by how much? e)How would the event affect the statement of cash flows (inflow, outflow, no effect) and in what section?

a)Book value $11,000 b).Gain (loss) on sale$3,000 c).Net income would increase $3,000 d).Total assets would increases by $3,000 e).Cash flow would increase by $14,000 Section Investing activities explanation: Historical cost $ 23,000 Less: Accumulated depreciation (12,000 ) Book value $ 11,000

City Taxi Service purchased a new auto to use as a taxi on January 1, Year 1, for $36,000. In addition, City paid sales tax and title fees of $1,200 for the vehicle. The taxi is expected to have a five-year life and a salvage value of $4,000. Required Using the straight-line method, compute the depreciation expense for Year 1 and Year 2. Assume the auto was sold on January 1, Year 3, for $21,000. Determine the amount of gain or loss that would be recognized on the asset disposal.

a)Year 1 Depreciation $6,640 Year 2 Depreciation $6,640 Explanation: Taxi cost $ 36,000 Sales tax & Title fees 1,200 Total cost $ 37,200 Depreciable Cost: $37,200 − $4,000 = $33,200 Depreciation: $33,200 ÷ 5 years = $6,640 per year Year 1 Depreciation: $6,640 Year 2 Depreciation: $6,640 b).Cost $ 37,200 Less: Accumulated depreciation (13,280 ) Book value, 1/1/Year 3 $ 23,920 Less: Accumulated depreciation (13,280) = ($6,640 × 2) Loss on Sale = Selling price; $21,000 − Book value; $23,920 = ($2,920

Koontz Company uses the perpetual inventory method. On January 1, Year 1, the company's first day of operations, Koontz purchased 900 units of inventory that cost $4.50 each. On January 10, Year 1, the company purchased an additional 1,150 units of inventory that cost $6.00 each. If Koontz uses a weighted average cost flow method and sells 1,050 units of inventory, the amount of inventory appearing on balance sheet following the sale will be approximately: (Round your intermediate calculations to one decimal place.) a)$4,500 b)$5,300 c)$5,565 d)$6,300

b) $5,300 Under the weighted-average method, the average cost of inventory is reported on both the income statement and the balance sheet. Units in ending inventory = 900 units + 1,150 units − 1,050 units sold = 1,000 units in ending inventory; Weighted average cost per unit = [(900 × $4.50) + (1,150 × $6.00)] ÷ 2,050 = $5.30 per unit; Ending inventory = 1,000 units × $5.30 = $5,300.

Domino Company uses the aging of accounts receivable method to estimate uncollectible accounts expense. Domino began Year 2 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $45,930 and $3,620, respectively. During the year, the company wrote off $2,720 in uncollectible accounts. In preparation for the company's Year 2 estimate, Domino prepared the following aging schedule: number of days past due: current, with $76,000 receivables amount, and 1% likely to be uncollectible. number of days past due: 0-30, with $28,100 receivables amount, and 5% likely to be uncollectible. number of days past due: 31-60, with $7,360 receivables amount, and 10% likely to be uncollectible. number of days past due: 61-90, with $3,820 receivables amount, and 25% likely to be uncollectible. number of days past due: over 3,500, with $3,500 receivables amount, and 50% likely to be uncollectible. total: $118,780 What will Domino record as Uncollectible Accounts Expense for Year 2? a)$1,986 b)$4,706 c)$5,606 d)$5,606

b)$4,706 ($76,000 × 1%) + ($28,100 × 5%) + ($7,360 × 10%) + ($3,820 × 25%) + ($3,500 × 50%) = $5,606 estimated ending allowance balance; $3,620 beginning allowance balance + uncollectible accounts expense − $2,720 write-offs = $5,606 ending allowance balance; uncollectible accounts expense = $5,606 − $3,620 + $2,720 = $4,706

Glasgow Enterprises started the period with 65 units in beginning inventory that cost $2.60 each. During the period, the company purchased inventory items as follows. Glasgow sold 325 units after purchase 3 for $2.60 each. Purchase : 1 Number of Items : 300 Cost: $3.10 Purchase : 2 Number of Items : 200 Cost: $3.20 Purchase : 3 Number of Items : 55 Cost: $3.60 If the company uses the weighted average cost flow method, Glasgow's ending inventory would be approximately: (Round your intermediate calculations to 2 decimal places.) a)$927. b)$920. c)$1,014. d)$775.

b)$920. Under the weighted-average method, the average cost of inventory is reported on both the income statement and the balance sheet. Units in ending inventory = 65 units + 555 units purchased − 325 units sold = 295 units in ending inventory; Cost of ending inventory = [(65 × $2.60) + (300 × $3.10) + (200 × $3.20) + (55 × $3.60)] ÷ 620 = $3.12 per unit; $3.12 per unit × 295 = $920.

Domino Company uses the aging of accounts receivable method to estimate uncollectible accounts expense. Domino began Year 2 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $45,350 and $3,560, respectively. During the year, the company wrote off $2,690 in uncollectible accounts. In preparation for the company's Year 2 estimate, Domino prepared the following aging schedule: What will Domino record as Uncollectible Accounts Expense for Year 2? Number of Days Past Due: Current Receivables Amount: $74,000 Percentage Likely to Be Uncollectible 1% Number of Days Past Due: 0-30 Receivables Amount: $27,700 Percentage Likely to Be Uncollectible 5% Number of Days Past Due: 31-60 Receivables Amount: $7,160 Percentage Likely to Be Uncollectible 10% Number of Days Past Due: 61-90 Receivables Amount: $3,720 Percentage Likely to Be Uncollectible 25% Number of Days Past Due: Over 90 Receivables Amount: $3,400 Percentage Likely to Be Uncollectible 50% a)$5,471 b)$1,911 Incorrect c)$4,601 d)$2,690

c)$4,601 ($74,000 × 1%) + ($27,700 × 5%) + ($7,160 × 10%) + ($3,720 × 25%) + ($3,400 × 50%) = $5,471 estimated ending allowance balance; $3,560 beginning allowance balance + uncollectible accounts expense − $2,690 write-offs = $5,471 ending allowance balance; uncollectible accounts expense = $5,471 − $3,560 + $2,690 = $4,601

Glasgow Enterprises started the period with 80 units in beginning inventory that cost $2.10 each. During the period, the company purchased inventory items as follows. Glasgow sold 360 units after purchase 3 for $10.40 each. Purchase 1, Number of Items:340, Cost:$2.60 Purchase 2, Number of Items:130, Cost:$2.70 Purchase 3, Number of Items:60, Cost:$3.10 If the company uses the FIFO cost flow method, Glasgow's cost of goods sold would be: a)$996 b)$756 c)$896 d)$1,116

c)$896 Under FIFO, the cost of the items purchased first is reported on the income statement, and the cost of the items purchased last is reported on the balance sheet. Cost of goods sold = (80 × $2.10) + (280 × $2.60) = $896.

Melbourne Company uses the perpetual inventory method. Melbourne purchased 600 units of inventory that cost $2.75 each. At a later date the company purchased an additional 700 units of inventory that cost $3.25 each. If Melbourne uses a LIFO cost flow method, and sells 900 units of inventory, the amount of ending inventory appearing on the balance sheet will be: a)$2,825. b)$1,200. c)$1,300. d)$1,100.

d)$1,100. Under LIFO, the cost of the items purchased last is reported on the income statement, and the cost of the items purchased first is reported on the balance sheet. Units in ending inventory = 600 units + 700 units − 900 units sold = 400 units; Ending inventory = 400 units × $2.75 = $1,100.

On January 1, Year 2, Grande Company had a $75,200 balance in the Accounts Receivable account and a $3,800 balance in the Allowance for Doubtful Accounts account. During Year 2, Grande recognized $211,000 of service revenue earned on account. The company collected $264,300 cash from accounts receivable. Uncollectible accounts are estimated to be 1% of sales on account. Based on this information, the amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows is: a) On January 1, Year 2, Grande Company had a $75,200 balance in the Accounts Receivable account and a $3,800 balance in the Allowance for Doubtful Accounts account. During Year 2, Grande recognized $211,000 of service revenue earned on account. The company collected $264,300 cash from accounts receivable. Uncollectible accounts are estimated to be 1% of sales on account. Based on this information, the amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows is: a) On January 1, Year 2, Grande Company had a $75,200 balance in the Accounts Receivable account and a $3,800 balance in the Allowance for Doubtful Accounts account. During Year 2, Grande recognized $211,000 of service revenue earned on account. The company collected $264,300 cash from accounts receivable. Uncollectible accounts are estimated to be 1% of sales on account. Based on this information, the amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows is: a) On January 1, Year 2, Grande Company had a $75,200 balance in the Accounts Receivable account and a $3,800 balance in the Allowance for Doubtful Accounts account. During Year 2, Grande recognized $211,000 of service revenue earned on account. The company collected $264,300 cash from accounts receivable. Uncollectible accounts are estimated to be 1% of sales on account. Based on this information, the amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows is: a) $3,860. b)$2,110. c)$19,850. d) $264,300.

d)$264,300. $264,300 cash collected from accounts receivable is a cash inflow for operating activities.

On January 1, Year 1, Friedman Company purchased a truck that cost $48,000. The truck had an expected useful life of 8 years and an $8,000 salvage value. The company uses the double-declining balance method. The book value of the truck at the end of Year 1 is: a)$43,000. b)$38,000. c)$40,000. d)$36,000.

d)$36,000. $48,000 × (2 × 12.5%) = $12,000 Depreciation expense for Year 1; $48,000 Cost − $12,000 Accumulated depreciation at end of Year 1 = $36,000 book value at the end of Year 1

The Miller Company recognized $135,000 of service revenue earned on account during Year 2. There was no beginning balance in the accounts receivable and allowance accounts. During Year 2, Miller collected $88,000 of cash from accounts receivable. The company estimates that it will be unable to collect 3% of its sales on account. The net realizable value of Miller's receivables at the end of Year 2 was: a) $47,000 b)$51,050 c)$44,360 d)$42,950

d)$42,950. $0 beginning balance + $135,000 revenue on account − $88,000 collections = $47,000 ending accounts receivable balance; $0 beginning balance + $4,050 uncollectible accounts expense − $0 write-offs = $4,050 ending allowance for doubtful accounts balance; $47,000 − $4,050 = $42,950 net realizable value

The balance in Accounts Receivable at the beginning of the period amounted to $3,040. During the period $9,880 of credit sales were made to customers. If the ending balance in Accounts Receivable amounted to $1,980, and uncollectible accounts expense amounted to $840, then the amount of cash inflow from customers that would appear in the operating activities section of the cash flow statement would be: a)$10,100 b)$9,880. c)$12,920. d)None of these answers are correct.

d)None of these answers are correct. $3,040 beginning accounts receivable balance + $9,880 credit sales − $1,980 ending accounts receivable balance = $10,940 cash collected from customers; The $840 in uncollectible accounts expense does not affect accounts receivable, and does not affect cash flows.

the right side of the accounting equation for a corporation may be viewed as:

obligations and commitments of the business sources of assets claims of creditors and owners

The balance sheet of the Algonquin company reported assets of $50,000, liabilities of $22,000, and common stock of $15,000. Based on this information, what is the amount of retained earnings?

$13,000. $50,000= $22,000+$15,000+?

The transaction, "provided services for cash" affects which two accounts? A. Revenue and expense B. Cash and revenue C. Cash and expense D. Cash and dividends

B. Cash and revenue

Which term describes assets generated through operations that have been reinvested into the business? A. liability B. dividend C. common stock D. retained earnings

D. retained earnings

On January 1, Year 2, the Accounts Receivable balance was $24,200 and the balance in the Allowance for Doubtful Accounts was $2,500. On January 15, Year 2, an $710 uncollectible account was written-off. The net realizable value of accounts receivable immediately after the write-off is: a)$23,490. b)$20,990. c)$21,700. d)$22,410.

c)$21,700. $24,200 − $710 = $23,490 accounts receivable balance after the write-off; $2,500 − $710 = $1,790 allowance balance after the write-off; $23,490 − $1,790 = $21,700 net realizable value after the write-off.

Rosewood Company made a loan of $8,400 to one of the company's employees on April 1, Year 1. The one-year note carried a 6% rate of interest. The amount of interest revenue that Rosewood would report during the years ending December 31, Year 1 and Year 2, respectively, would be: a)$504 and $0. b)$0 and $504. c)$378 and $126. d)$126 and $378

c)$378 and $126 $8,400 × 6% × 9/12 months = $378 interest revenue in April − December, Year 1; $8,400 × 6% × 3/12 months = $126 interest revenue in January − March, Year 2

Revenue on account amounted to $7,000. Cash collections of accounts receivable amount to $4,550. Expenses for the period were $3,600. The company paid dividends of $1,200. What was the amount of net income for the period? A. $950 B. $2,200 C. $3,400 D. $3,350

c. $3,400 Net income= revenue of $7,000- expenses of $3,60=$3,400. Dividends do not affect net income.

What are the effects of purchasing inventory on account?

+ in assets, + in liabilities Purchasing inventory on account is an asset source transaction. It causes both assets and liabilities to increase.

Assume perpetual inventory method is used. The company purchased $12,300 of merchandise on account under terms 4/10, n/30. The liability was paid within the discount period. all of the merchandise purchased was sold for $18,600 cash. The amount of gross margin for the four transactions is: A. $8,520 B. $6,300 C. $8,592 D. $6,048

A. $8,520 COGS=($12,300-$1,800)x0.96= $10,080 Sales Revenue $18,600-COGS $10,080=$8,520

Which of the following items is not a product cost? A. Transportation cost on goods delivered to customers B. Cost of merchandise purchased for resale C. Transportation cost on merchandise purchased from suppliers D. All of the answers are product costs

A. Transportation cost on goods delivered to customers

When a merchandising company sells inventory it will: A. Recognize only an expense B. Recognize only revenue C. Recognize revenue and expense D. Not recognize revenue or expense

C. Recognize revenue and expense

Businesses have a _______function, which means it has a duty to protect and use its assets for the benefit of the owner.

stewardship

Jantzen company recorded employee salaries earned but not yet paid. Which of the following represents the affect of this transaction on financial statements?

+ in liabilities, - in equity, + in expense, - in net income

Revenue on account amounted to $3,200. Cash collections of accounts receivable amounted to $2,900. Cash paid for expenses was $2,600. The amount of employee salaries accrued at the end of the year was $400. What is the net cash flow from operating activities for the year? A. $300 B. $400 C. $600 D. $3,200

A. $300 Net cash flow from operating activities= $2,900 collected from customers- $2,600 paid for expenses= $300. Revenue earned on account and accrued salaries are not cash flow activities.

Jackson Company paid $500 cash for salary expenses. Which of the following choices accurately reflects how this event affects the company's financial statements?

Assets= Liabilities + Equity Revenue -expense =net SOCF (500) N/A (500) N/A N/A (500) (500)

Revenue on account amounted to $5,000. Cash collections of accounts receivable amounted to $2,300. Expenses for the period were $2,100. The company paid dividends of $450. What was the amount of net income for the period? A. $1,200 B. $2,400 C. $2,850 D. $2,450

B. $2,900 Net income= revenue of $5,000- expenses of $2,100=$2,900 Dividends do not affect the determination of net income.

Retained earnings at the beginning and ending of the period were $450 and $1,000 respectively. If revenues were $1,700 and dividends paid to stockholders were $350, what was the amount of expenses for the period? A. $1,150 B. $800 C. $1,350 D. $550

B. $800 Beginning retained earnings of $450+ revenues of $1,700- expenses- dividends of $350= ending retained earnings of $1,000 Expenses =$800

Paying cash to settle a salaries payable obligation will affect which section of the statement of cash flows? A. Financing activities B. Operating Activities C. Noncash activities D. Investing activities

B. Operating Activities

Li company paid cash to purchase land. As a result of this accounting event, which of the following statements is true? A. Total assets decreased B. Total assets were unaffected C. Total stockholders' equity decreased D. Both assets and stockholders' equity decreased

B. Total assets were unaffected Paying cash for land is an asset exchange transaction that increases one asset and decreases the other.

The gross margin appears on the: A. Single step income statement B. Multistep income statement C. Single step statement of cash flows D. Multistep statement of cash flows

Gross margin is the difference between sales revenue and the cost of goods sold expense. It is normally shown as the first step in a multi-step income statement. The operating expenses are then subtracted from gross margin to determine the amount of net income.

An event that increases total assets and total claims is:

asset source transaction

The statement of changes in stockholders' equity captures information related to the company's:

owners

Assume perpetual inventory method is used. The company purchased $12,500 of merchandise on account under terms 2/10, n/30. The company returned $1,200 of merchandise to the supplier before payment was made. The liability was paid within the discount period. All of the merchandise purchased was sold for $18,800 cash. What is the amount of gross margin between the four transactions? A. $5,100 B. $7,726 C. $6,550 D. $11,074

$7,726 Cost of goods sold= ($12,500-$1,200)x0.98=$11,074 Sales Revenue $18,800-COGS $11,074=$7,726

The following account balances were drawn from the financial statements of the Grayson company: Cash $5,900 Accounts Payable $2,000 Accounts receivable $3,000 Common Stock ? Land $9,500 Retained Earnings, January 1 $4,200 Revenue $11,000 Expenses $8,000 What is the balance of common stock?

$9,200 Assets ($5,900+ $3,000+ $9,500)= liabilities ($2,000) = stockholders equity ($16,400). Retained Earnings($4,200+ $11,000-$8,000) $16,400= Common stock+$7,200; common stock= $9,200

Edwards Shoe Store sold shoes that cost the company $5,700 for $8,200. Which of the following shows how the recognition of the cost of goods sold will affect the Company's financial statement? (Ignore the effects of the associated revenue recognition.)

- in assets, - in equity, + in expense, - in net income

1. Performed services for $25,000 cash 2. Purchased land for $6,000 cash 3. Hired an accountant to keep the books 4. Received $50,000 cash from the issue of common stock 5. Borrowed $5,000 cash from the state bank 6. Paid $14,000 cash for salary expense 7. Sold land for $9,000 cash 8. Paid $10,000 cash on the loan from state bank 9. Paid $2,800 cash for utilities bank 10. Paid a cash dividend of $5,000 to the stockholders

1. OA 2. IA 3. 4. FA 5. FA 6. OA 7. IA 8. FA 9. OA 10. FA

Yowell company began operations on January 1, year 1. During year 1, the company engaged in the following cash transactions: 1. Issued stock for $60,000 2. Borrowed $35,000 from its bank 3. Provided consulting services for $59,000 cash 4. Paid back $25,000 of the bank loan 5. Paid rent expense for $14,000 6. Purchased equipment for $22,000 cash 7. Paid $4,000 dividends to stockholders 8. Paid employees' salaries of $31,000 What is Yowell's notes payable balance at the end of year 1? A. $10,000 B. $35,000 C. $0 D. $25,000

A. $10,000 Beginning notes payable of $0+ loan of $35,000- repayment of loan of $25,000= ending notes payable balance of $10,000

Smokey Enterprises began operations by receiving $100,000 cash from its sole owner Jessica Jones. During its first year of operations, the business earned $20,000 in cash from operations and paid $15,000 in cash expenses. What is Smokey Enterprises' net income for its first year of operations? A. $5,000 B. $105,000 C. $20,000 D. $15,000

A. $5,000

Nelson Company experienced the following transactions during year 1, its first year in operation. 1. Issued $8,000 of common stock to stockholders 2. Provided $4,300 of services on account 3. Paid $2,100 cash for operating expenses 4. Collected $2,900 of cash from accounts receivable 5. Paid a $200 cash dividend to stockholders What is the net cash flow from operating activities shown on the year 1 statement of cash flows? A. $800 B. $600 C. $2,000 D. $2,200

A. $800 Net cash flow from operating activities=$2,900 cash collected from customers- $2,100 cash paid for expenses= $800. The issue of stock for cash and the payment of dividends are classified as a financing activities.

The year end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets=$40,000; liabilities=?; common stock=$7,000; Revenue=$15,000; Dividends=$1,750; Beginning retained earnings=$4,750; Ending retained earnings=$9,000 Based on this information, the amount of expenses on Calloway's income statement was A. $9,000 B. $4,250 C. $11,750 D. $500

A. $9,000 Beginning retained earnings+ revenue- expenses-dividends= ending retained earnings $4,750+$15,000-expenses-$1,750=$9,000 Expenses =$9,000

Sanchez Company engaged in the following transactions during Year 1: 1) Started the business by issuing $14,500 of common stock for cash. 2) The company paid cash to purchase $8,600 of inventory. 3) The company sold inventory that cost $6,000 for $12,650 cash. 4) Operating expenses incurred and paid during the year, 5,500. Sanchez Company engaged in the following transactions during Year 2: 1) The company paid cash to purchase $12,800 of inventory. 2) The company sold inventory that cost $10,200 for $19,250 cash. 3) Operating expenses incurred and paid during the year, $6,500. Sanchez uses the perpetual inventory system. What is Sanchez's gross margin for the year 2? A. $9,050 B. $2,550 C. $6,450 D. $10,200

A. $9,050 $19,250 Sales revenue- $10,200 cost of goods sold= $9,050 Gross margin

Which of the following is an accurate depiction of the accounting equation? A. Assets=liability+ common stock+ retained earnings B. Assets= liability+ common stock - expenses C. Assets= liabilities + retained earnings - dividends D. Assets= liabilities =common stock + dividends

A. Assets=liability+ common stock+ retained earnings

Which of the following is not a commonly accepted internal control activity? A. Hiring only college graduates B. Separation of duties C. Requiring employee absences D. Using prenumbered documents

A. Hiring only college graduates. Graduating from college does not make an individual trustworthy. Many of the world's largest frauds have been perpetuated by people with college degrees.

Jack's snow removal company received a cash advance of $11,700 on december 1, year 1 to provide services during the months of december, january, and february. The year end adjustment on december 31 year 1 to recognize the partial expiration of the contract will A. Increase stockholder equity by $3,900 B. Increase assets by $3,900 C. Increase liabilities by $3,900 D. Increase assets by $3,900 and increase stockholder equity by $3,900

A. Increase stockholder equity by $3,900

The Wilson Company purchased $24,000 of merchandise from the Poole Wholesale Company. Wilson also paid $1,700 for freight costs to have the goods shipped to its location. Which of the following statements regarding the necessary entries for the transactions is true? Wilson uses the perpetual inventory system. A. Total increases to the inventory account would be $25,700 B. Total increases to the inventory account would be $24,000 C. Transportation-in would be increased by $1,700 D. Total increases to the inventory account would be $1,700

A. Total increases to the inventory account would be $25,700

As of December 31, year 2, Moss company had total cash of $195,000, notes payable of $90,500, and a common stock of $84,500. During year 3, Moss earned $42,000 of cash revenue, paid $24,000 for cash expenses and paid a $3,000 cash dividend to the stockholders. A.) What are the amount of retained earnings as of December 31, Year 2? B.) Complete the equality of the accounting equation as of December 31, year 3.

A.) $20,000. Assets=Notes pyable= Common Stck +Retained Earnings $195,000=$90,500 +$84,500 + ? B.) $210,000= $90,500+ $84,500 +$35,000

There are six articles of AICPA code of professional conduct. (American Institute of Certified Public Accountants)

Article I Responsibilities In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral judgments in all their activities. Article II The Public Interest Members should accept the obligation to act in a way that will serve the public interest, honor the public trust, and demonstrate commitment to professionalism. Article III Integrity To maintain and broaden public confidence, members should perform all professional responsibilities with the highest sense of integrity Article IV Objectivity and independence A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing auditing and other attestation services. Article V Due Care A member should observe the profession's technical and ethical standards, strive continually to improve competence and the quality of services, and discharge professional responsibility to the best of the member's ability. Article VI Scope and Nature of Services A member in public practice should observe the Principles of the Code of Professional Conduct in determining the scope and nature of services to be provided.

Assume the perpetual inventory method is used: 1. The Company purchased $13,800 of merchandise on account under terms 2/10, n/30. 2. The company returned $3,300 of merchandise to the supplier before payment was made. 3. The liability was paid within the discount period. 4. All of the merchandise purchased was sold for $21,600 cash. What effect will the return of merchandise to the supplier have on the accounting equation? A. Assets and stockholders' equity are decreased by $3,300 B. Assets and liabilities are decreased by $3,234 C. Assets and liabilities are decreased by $3,300 D. None. It is an asset exchange transaction

Assets and liabilities are decreased by $3,300

Sheldon company began year 1 with $2,000 in its supplies account. During the year, the company purchased $5,900 of supplies on account. The company paid $2,900 on accounts payable by year end. At the end of year 1, Sheldon company counted $3,500 on supplies on hand. Sheldon financial statements for year 1 would show: A. $5,000 of supplies; $1,500 of supplies expense B. $3,500 of supplies; $4,400 of supplies expense C. $5,000 of supplies; $5,900 of supplies expense D. $3,500 of supplies; $2,400 of supplies expense

B. $3,500 of supplies; $4,400 of supplies expense $2,000 beginning balance+ $5,900 supplies purchased- $3,500 ending balance= $4,400 supplies expense

Stoch company's balance sheet report assets of $112,000, liabilities of $29,000 and common stock of $26,000 as of December 31, Year 1. If retained earnings on the balance sheet as of December 31, Year 2, amount to $74,000 and Stoch paid a $28,000 dividend during Year 2, then the amount of net income for year 2 was which of the following: A. $17,000 B. $45,000 C. $57,000 D. $28,000

B. $45,000 If total assets equals $112,000, liabilities were $29,000 and common stock was $26,000 retained earnings must've been $57,000. At the end of Year 2, the company reported $74,000 in retained earnings, a $17,000 increase. During Year 2 Stoch paid a $28,000 cash dividend. $28,000+$17,000=$45,000

Stosch Company's balance sheet reported assets of $137,000 liabilities of $34,000 and common stock of $31,000 as of December 31, year 1. If retained earnings on the balance sheet as of December 31, year 2 amount to $94,000 and Stosch paid a $33,000 dividend during year 2, then the amount of net income for year 2 was which of the following? A. $22,000 B. $55,000 C. $72,000 D. $33,000

B. $55,000 Assets=$137,000-liabilities ($34,000)-common stock($31,000)= retained earnings of $72,000. Year 2 the company reported $94,000 in retained earnings, a $22,000 increase, During year 2, they paid a $22,000 dividend. Year 2 net income must be $22,000 +$33,000=$55,000

Assume the perpetual inventory method is used. 1. Green Company purchased merchandise inventory that cost $18,000 under terms 2/10, n/30 and FOB shipping point. 2. The company paid freight costs of $800 to have the merchandise delivered. 3. Payment was made to the supplier within 10 days after the purchase. 4. All of the merchandise was sold to customers on account for $27,500 and delivered under terms FOB shipping point, with freight costs amounting to $600. As a result of the above transactions of the Green Company, the net cash flow from operating activities was: A. $19,040 outflow B. $8,460 inflow C. $9,860 inflow D. $27,500 inflow

B. $8,460 inflow Inflow from sale $27,500- outflow for payment of inventory purchase ($18,000x0,98)-outflow for transportation-in $800-outflow for transportation-out $600 =$8,460 inflow

Assume the perpetual inventory method is used: 1. The Company purchased $12,500 of merchandise on account under terms 2/10, n/30. 2. The company returned $2,000 of merchandise to the supplier before payment was made. 3. The liability was paid within the discount period. 4. All of the merchandise purchased was sold for $19,000 cash. What is the net cash flow from operating activities as a result of the four transactions? A. $6,500 B.$8,815 C. $6,305 D. $8,875

B. $8,875 Cash outflow for inventory purchase: ($12,500-$2,000)x0.97=$10,185 Cash inflow from inventory sale: $19,000 Net cash flow= $19,000-$10,185=$8,815

Assume the perpetual inventory method is used: 1. The Company purchased $12,800 of merchandise on account under terms 2/10, n/30. 2. The company returned $2,300 of merchandise to the supplier before payment was made. 3. The liability was paid within the discount period. 4. All of the merchandise purchased was sold for $19,600 cash. The amount of gross margin for the four transactions is: A. $6,800 B. $9,310 C. $6,664 D. $9,356

B. $9,310 Cost of goods sold= ($12,800-$2,300)x0.98=$10,290 sales revenue $19,600- cost of goods sold $10,290=$9,310

Jack's snow removal company received a cash advance of $6,000 on December 1, year 1 to provide services during the months of December, January, and February. The year-end adjustment on December 31, year 1 to recognize the partial expiration of the contract will A. increase assets by $2,000 B. increase stockholders equity by $2,000 C. increase liabilities by $2,000 D. increase assets by $2,000 and increase stockholders equity by $2,000

B. Increase stockholder's equity by $2,000 The year end adjustment to recognize one months work on the 3 month contract results in a $2,000 decrease in liabilities (unearned revenue) and an increase in stockholders' equity (retained earnings due to recognizing revenue.)

Yowell Company began operations on January 1, Year 1. During year 1, the company engaged in the following cash transactions: 1. Issued stock for $56,000 2. Borrowed $33,000 from its bank 3. Provided consulting services for $55,000 cash 4. Paid back $23,000 of the bank loan 5. Paid rent expense for $13,000 6. Purchased equipment for $20,000 cash 7. Paid $3,800 dividends to stockholders 8. Paid employees salaries of $29,000 What is Yowell's net cash flow from operating activities? A. Inflow of $42,000 B. Inflow of $13,000 C. Inflow of $26,000 D. Inflow of $9,200

B. Inflow of $13,000 Net cash flow from operating activities=$55,000 inflow from consulting services- $13,000 outflow for rent expense- $29,000 outflow for salaries expense=$13,000 outflow

Galaxy company sold merchandise costing $2,600 for $4,200 cash. The merchandise was later returned by the customer for a refund. If the perpetual inventory method is used, what effect will the sales return have on the accounting equation? A. Total assets decrease by $4,200 and total stockholders' equity is decreased by $2,600 B. Total assets and total stockholders' equity decrease by $1,600 C. Total assets and total stockholders' equity increase by $1,600 D. Total assets and total stockholders' equity decrease by $4,200

B. Total assets and total stockholders' equity decrease by $1,600

Santa Fe Company was started on January 1,Year 1 when it acquired $8,700 cash by issuing common stock. During year 1, the company earned cash revenues of $4,550, paid cash expenses of $3,100 and paid a cash dividend of $650. Which of the following is true? A. Year 1 income statement would show net income of $800 B. Year 1 statement of cash flows would show a net cash flow from financing activities of $8,050. C. The balance sheet at December 31, year 1 would show stockholder's equity of $13,250 D. The year 1 statement of cash flows would show net cash inflow from operating activities of $8,700

B. Year 1 statement of cash flows would show a net cash flow from financing activities of $8,050. $8,700 cash inflow from issuing stock-$650 cash outflow for dividends= $8,050 net cash inflow from financing activities.

Which term describes the distribution of the companys assets back to the owners of the business? A. liability b. dividend c. retained earnings d. common stock

B. dividend

The year end financial statements of calloway company contained the following elements and corresponding amounts: Assets + $30,000; Liabilities=?; common stock=$6,000; revenue=$13,000; dividends=$1,250; Beginning Retained Earnings=$4,250; Ending Retained Earnings=$8,000. Based on this information, the amount of expenses on calloway's income statement was A. $500 B. $3,750 C. $8,000 D. $10,250

Beginning retained earnings + revenue - expenses - dividends = retained earnings $4,250 + $13,000- expenses- $1,250= $8,000 expenses = $8,000

The year-end financial statements for Calloway company contained the following elements and corresponding amounts: Assets= $27,000; liabilities=?, common stock =$5,700, revenue=$12,400, dividends= $1,100, Beginning retained earnings = $4,100, Ending retained earnings =$7,700. Based on this information, the amount of expenses on Calloway's income statement was: A. $9,800 B. $500 C. $7,700 D. $3,600

C. $$7,700 Beginning retained earnings+ revenue- expenses - dividends = ending retained earnings $4,100 +$12,400-expenses-$1,100=$7,700 Expenses= $7,700

Sheldon Company began year 1 with $1,900 in its supplies account. During the year, the company purchased $5,600 of supplies on account. The company paid $2,800 on accounts payable by year end. At the end of year 1, Sheldon counted $3,300 of supplies on hand. Sheldon's financial statements for Year 1 would show: A. $4,700 of supplies; $1,400 of supplies expense B. $3,300 of supplies; $4,200 of supplies expense C. $3,300 of supplies; $4,200 of supplies expense D. $4,700 of supplies; $5,600 of supplies expense

C. $3,300 of supplies; $4,200 of supplies expense $3,300 of supplies on hand is the supplies asset on the balance sheet; $1,900 beginning balance+ $5,600 of supplies purchased- $3,300 ending balance = $4,200 supplies expense

Assume perpetual inventory method is used. The company purchased $12,500 of merchandise on account under terms 2/10, n/30. The company returned $1,200 of merchandise to the supplier before payment was made. The liability was paid within the discount period. All of the merchandise purchased was sold for $18,800 cash. What effect of the return of merchandise have on the accounting equation? A. assets and stockholder's equity are decreased by $1,176 B. Asses and liabilities are decreased by $1,176 C. Assets and liabilities are decreased by $1,200 D. None. It is an asset exchange transaction

C. Assets and liabilities decreased by $1,200

Which of the following is an example of revenue? A. Cash received from a bank loan B. cash received from investors from the sale of common stock C. cash received from customers at the time services were provided. D. Cash received from the sale of land for its original selling price.

C. Cash received from customers from customers at the time services were provided. Cash received from providing services to customers is an example of revenue, and it's an asset source transaction.

Which of the following is a widely recognized source of pressure to commit fraud in the workplace? A. Easy access to company cash B. Perceived favoritism C. Intimidation from superiors D. prioritizing family needs over work commitments

C. Intimidation from superiors Easy access to company cash suggests an opportunity rather than a pressure. Perceived favoritism and family needs lead to rationalism rather than pressure.

Galaxy company sold merchandise costing #3,600 for $6,200 cash. The merchandise was later returned by the customer for a refund. If the perpetual inventory method is sued, what effect will the sales return have on the accounting equation? A. Total assets and stockholders' equity increase by $2,600 B. Total assets decrease by $6,200 and total stockholders' equity is decreased by $3,600 C. Total assets and stockholders' equity decrease by $2,600 D. Total assets and stockholders' equity decrease by $6,200.

C. Total assets and stockholders' equity decrease by $2,600

Bledsoe Company received $26,000 cash from the issue of common stock on January 1, year 1. During year 1, Bledsoe earned $9,600 of revenue on account. The company collected $8,200 cash from accounts receivable and paid $6,500 cash for operating expenses. Based on this info alone, during year 1, which of the following is true? A. Total assets increased by $37,300 B. Total assets increased by $1,700 C. Total assets increased by $29,100 D. Total assets didn't change.

C. Total assets increased by $29,100. $26,000 (cash)+ $9,600 (accounts receivable)+ $8,200(cash)- $8,200(accounts receivable)- $6,500(cash)=$29,100 increase

Which of the following would not require and end of year adjusting entry? A. Purchasing supplies for cash B. Paying for one years rent on july 1 C. Providing services for cash D. All of the above

C. providing services for cash Providing services for cash does not require an end of year adjusting entry. This transaction would be recorded when the cash is received at the time the service is provided. Supplies and prepaid rent both require end of year adjusting entries to recognize expense.

Assume the perpetual inventory method is used: 1. The Company purchased $12,700 of merchandise on account under terms 4/10, n/30. 2. The company returned $2,200 of merchandise to the supplier before payment was made. 3. The liability was paid within the discount period. 4. All of the merchandise purchased was sold for $19,400 cash. The amount of gross margin from the four transactions is: A. $9,408 B. $6,432 C. $6,700 D. $9,320

D, $9,320 Cost of goods sold=($12,700-$2,200)x0.96=$10,080 Sales revenue $19,400-cost of goods sold $10,080=$9,320

The year-end financial statements for Calloway company contained the following elements and corresponding amounts: Assets= $28,000; liabilities=?, common stock =$5,800, revenue=$12,600, dividends= $1,150, Beginning retained earnings = $4,150, Ending retained earnings =$7,800. The amount of liabilities reported on the end of period balance sheet was: A. $20,200 B. $22,200 C. $18.050 D. $14,400

D. $14,400 Assets= liabilities+ common stock + retained earnings $28,000= liabilities+$5,800 +$7,800 Liabilities=$14,400

Liabilities: A. Represent obligations to repay debts B. May increase when assets increase C. Have priority in business liquidations D. All of the above

D. All of the above

The cost of goods sold account is classified as: A. Liability B. Asset C. Contra asset D. Expense

D. Expense

The Sarbanes Oxley Act is:

Not a fraud case. Instead, it is legislation that was established to deter practices that lead to major frauds such as those perpetuated by Enron and WorldCom.

The implementation of an effective internal control system:

Reduces but does not eliminate fraud. For example, separating duties is useless if employees work together to thwart the system.

Required Which of the following items should be classified as long-term operational assets?

a.Prepaid insurance (No) b.Coal mine (Yes) c.Office equipment (Yes) d.Accounts receivable (No) e.Supplies (No) f.Copyright(Yes) g.Delivery van(Yes) h. Land used in the business (Yes) i.Goodwill (Yes) j.Cash (No) k.Filing cabinet (Yes) l.Tax library of accounting firm (Yes)

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,900,000. Harding paid $350,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $374,000; Building, $1,100,000 and Equipment, $726,000. What value will be recorded for the building? a)$175,000 b)$950,000 c)$800,000 d)$1,100,000

b) $950,000 The total price of a basket purchase must be allocated among the assets acquired. Accountants commonly allocate the purchase price using the relative fair market value method. Percentage allocated to building = Appraised amount for building of $1,100,000 ÷ Total appraised values of $2,200,000 (or $374,000 + $1,100,000 + $726,000) = 50%; Allocation of actual purchase price to building = Total purchase price of $1,900,000 × 50% = $950,000

Ballard Company uses the perpetual inventory system. The company purchased $8,600 of merchandise from Andes Company under the terms 2/10, net/30. Ballard paid for the merchandise within 10 days and also paid $310 freight to obtain the goods under terms FOB shipping point. All of the merchandise purchased was sold for $16,200 cash. What is the gross margin that resulted from these transactions? A. $7,290 B.$7,462 C. $7,600 D. $8,600

b. $7,462 Cost of goods sold=( purchase of inventory $8,600x0.98)/transportation-in $310=$8,738; sales revenue $16,200- cost of goods sold $8,738 = gross margin $7,462

Yowell Company began operations on January 1, year 1. During year 1, the company engaged in the following cash transactions: 1) issued stock for $40,000 2) borrowed $25,000 from its bank 3) provided consulting services for $39,000 cash 4) paid back $15,000 of the bank loan 5) paid rent expense for $9,000 6) purchased equipment for $12,000 cash 7) paid $3,000 dividend to stockholders 8) paid employees salaries of $21,000 What is Yowell's net cash flow from operating activities?

inflow of $9,000

Liabilities may be described as

sources of assets and obligations to repay creditors