ACC 201 Chapters 3-5 Practice Exam

While preparing the April 30th bank reconciliation, the accountant identified the following items: Company's balance according to the general ledger $15,000 Outstanding checks $2,500 Bank service charge $15 A customer's NSF check returned by the bank $100 What is the company's adjusted cash balance at April 30th?

$14885 $15000 (book balance) - 100 (NSF check) - 15 (service charge) = $14885

A company needs to record 6 months of accrued interest on a 4-year, 12%, $12,000 promissory note payable. How much interest expense should be accrued?

$720 $12000 (principal) x 0.12 (interest rate) x 6/12 (time period) = $720

A customer's check for $25 that had been deposited into the company's checking account the previous month was returned stamped "NSF" by the bank. Which of the following journal entries is required?

Accounts receivable $25 Cash $25

Cozy Corporation purchased supplies at a cost of $15,000 during the year. At January 1st, supplies on hand were $5000. At December 31, supplies on hand are $2000. Calculate supplies expense for the year.

$18000 $5000 (amount on hand Jan 1) + 15000 (purchased) - $2000 (amount on hand Dec 31) = $18000

If the end-of-year supplies on hand totaled $200, and purchases totaled $300, and supplies on hand at the beginning of the year amounted to $100, how much will be reported as supplies expense for the current year?

$200 $100 (beginning balance) + $300 (purchases) - $200 (ending balance) = $200

Data for the year ended December 31 are presented below: Sales (credit) $2,500,000 Sales returns and allowances $50,000 Accounts Receivable (December 31) $640,000 Allowance for Doubtful Accounts (Before adjustment at December 31) $20,000 Estimated amount of uncollected accounts based on aging analysis $45,000 Refer to AT&U Company. If the company estimates its bad debts at 1% of net credit sales, what amount will be reported as bad debt expense?

$24500 ($2500000 (sales) - $50000 (sales returns) = $2450000) x 0.01 = $24500

The company received a promissory note from a customer on March 1, 2019. The principal amount of the note is $20,000; the terms are 3 months and 9% annual interest. Refer to the information for Accent Flooring. What is the total amount of interest the company will receive when the note is collected?

$450 $20000 (principal) x 0.9 (rate) x 3/12 (fraction of year) = $450

The following information relates to the company's November bank reconciliation: Bank statement balance $10,700 Unadjusted cash balance from the company's records ? Deposit in transit $2,100 Outstanding checks $1,200 Bank service charges $300 Interest earned on the bank account $100 Customer's NSF check returned by the bank $400 Refer to Dreammaker Kitchens. As a result of the bank reconciliation process, what is the net increase or decrease in cash which must be recorded on the company's books?

$600 decrease Adjustment = $300 (service charges) + $400 (NSF checks) + $100 (interest earned) = $600

Data for the year ended December 31 are presented below: Sales (credit) $2,500,000 Sales returns and allowances $50,000 Accounts Receivable (December 31) $640,000 Allowance for Doubtful Accounts (Before adjustment at December 31) $20,000 Estimated amount of uncollected accounts based on aging analysis $45,000 Refer to AT&U Company. If the company estimates its bad debt to be 2% of net credit sales, what will be the balance in the Allowance for Doubtful Accounts account after the adjustment for bad debts?

$69000 $20000 (allowance for doubtful accounts balance before adjustment) + $49000 (Adjustment) = $69000

Each of the following items is considered a cash equivalent except

180-day note issued by a local government

A company receiving payment of a $20,000 accounts receivable within 10 days with terms of 2/10, n/30, would record a sales discount of:

2% of $20,000

Carlock Systems received a 6-month, 12% note for $50,000 from a customer on November 1, 2019. The note is due on April 30, 2020. Assuming the company's accounting period ends on December 31, how much interest revenue should be recognized during 2019 and 2020.

2019: $1000 and 2020: $2000

Which of the following entries properly closes a temporary account?

Income Summary 400 Salaries Expense 400

The company received a promissory note from a customer on March 1, 2019. The principal amount of the note is $20,000; the terms are 3 months and 9% annual interest. Refer to the information for Accent Flooring. At the maturity date, the customer pays the amount due for the note and interest. What entry is required on the books of Accent Flooring on the maturity date assuming that none of the interest had already been recognized?

Increase Cash by $20,450, increase Interest Revenue by $450, and decrease Notes Receivable by $20,000

Failure to record the earned portion of unearned revenue would result in which of the following?

Net Income being understated

The College Store accepts MasterCard for payments of purchases made by students. The credit card drafts are deposited directly in a bank account. MasterCard charges a 1.55% collection fee. Credit card drafts totaling $10,000 are deposited during August. Recording the sales and deposits will result in an increase in

Service Charge Expense for $155

The asset account, Supplies, has a balance of $10,000 on January 1. During January, $22,000 of supplies were purchased on account and the liability was appropriately recorded. A count of supplies at the end of January indicates a balance of $2,000. What adjusting entry is necessary at January 31?

Supplies expense 30,000 Supplies 30,000

Under accrual accounting when is revenue recognized?

When earned, and expenses when incurred

Which of the following items would be added to the company's cash balance on a bank reconciliation?

interest earned on the bank account

Which of the following adjusting entries involves the cash account? (Accrued expenses, deferred revenues, deferred liabilities, none of the above)

none of the above