ACC 281 Final Exam Review
A debit to an asset account indicates a(n) A. error. B. credit was made to a liability account. C. decrease in the asset. D. increase in the asset.
D. increase in the asset.
The difference between the balance of a plant asset account and the related accumulated depreciation account is termed: A. Book Value B. Market Value C. Liability D. Contra Asset
B. Market Value
During January 2014, its first month of operation, Osborn Enterprises earned net income of $1,700 and paid dividends to the owners of $500. At January 31, the balance in Retained Earnings will be A. $1,200 credit B. $500 debit C. $1,700 debit D. $0
A. $1,200 credit Solution: Retained Earnings=Equity Equity=Assets-Liabilities. Net income is an asset and dividends is a liability. So, $1,700-$500=$1,200. Retained Earnings increases with a credit and decreases with a debit. Since this particular situation caused an increase to Retained Earnings, it has a credit balance.
Equipment was purchased for $68,000 on January 1, 2013. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31, 2014, if the straight-line method of depreciation is used? A. $26,720 B. $13,360 C. $11,440 D. $22,880
A. $26,720 Solution: Subtract the salvage value from the cost of the equipment and then divide it by its useful life, and multiplied by the number of years since date of purchase, which is 2 in this case. First, cost of equipment is $68,000+$2,800+$8,000=$78,800 Then, $78,000-$12,000=$66,800 Finally, $66,800/5=$13,360. $13,360x2=$26,720, which is the amount of accumulated depreciation as of December 31, 2014.
On October 1, 2014, Mann Company places a new asset into service. The cost of the asset is $80,000 with an estimated 5-year life and $20,000 salvage value at the end of its useful life. What is the depreciation expense for 2014 if Mann Company uses the straight-line method of depreciation? A. $3,000 B. $16,000 C. $4,000 D. $8,000
A. $3,000 Solution: Subtract the salvage value from the cost of the asset, then divide that by its useful life. After that, multiply it by the # of months left in the year purchased over 12 (in this case, 3/12). So, $80,000-$20,000=$60,000 $60,000/5=$12,000 $12,000(3/12)=$3,000
Fehr Company sells merchandise on account for $5,000 to Kelly Company with credit terms of 2/10, n/30. Kelly Company returns $1,000 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check? A. $3,920 B. $4,000 C. $4,900 D. $4,920
A. $3,920
Andre Company collected $4,515 from cash sales to customers, which includes both sales revenue and 5% sales taxes. How much should be recognized as sales revenue? A. $4,300 B. $4,515 C. $4,289.25 D. $4,000
A. $4,300 Solution: The amount of sales can be computed by dividing total cash received by 100% plus the sales tax rate of 5%. $4,515/1.05 = $4,300.
Nance Corporation's December 31, 2014 balance sheet showed the following: 8% preferred stock, $20 par value, cumulative; 30,000 shares authorized, 15,000 shares issued....................................................$300,000 Common stock, $10 par value, 3,000,000 shares authorized; 1,950,000 shares issued, 1,920,000 shares outstanding...................................$19,500,000 Paid in capital in excess of par value-preferred stock...........................................................................$60,000 Paid in capital in excess of par value-common stock....................................................................$27,000,000 Retained Earnings............................................$7,650,000 Treasury Stock (30,000 shares).....................$630,000 Nance's total paid-in capital was A. $46,860,000 B. $47,490,000 C. $46,230,000 D. $27,060,000
A. $46,860,000 Solution: $300,000+$19,500,000+$60,000+$27,000,000=$46,860,000 otherwise known as total paid-in capital. Retained earnings and treasury stock are irrelevant to this question, don't let them confuse you.
At December 31, 2014 Howell Company's inventory records indicated a balance of $858,000. Upon further investigation it was determined that this amount included the following: • $168,000 in inventory purchases made by Howell shipped from the seller 12/27/14 terms FOB destination, but not due to be received until January 2nd • $111,000 in goods sold by Howell with terms FOB destination on December 27th. The goods are not expected to reach their destination until January 6th. • $9,000 of goods received on consignment from Westwood Company What is Howell's correct ending inventory balance at December 31, 2014? A. $681,000 B. $570,000 C. $690,000 D. $849,000
A. $681,000 Solution: $858,000-$168,000=$690,000 $690,000- $9,000= $681,000 The $111,000 is not accounted for in this situation because it is for SOLD goods.
The interest on a $4,000, 9%, 90-day note receivable is A. $90. B. $360. C. $30. D. $60.
A. $90 Solution: $4,000 × .09 × 90/360 = $90
A company purchased land for $84,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Proceeds from salvage of the demolished building was $1,200. Under the historical cost principle, the cost of the land was recorded at: A. $94,800 B. $84,000 C. $89,000 D. $96,000
A. $94,800 Solution: $84,000+$5,000+$7,000=$96,000 $96,000-$1,200=$94,800
The first required step in the accounting cycle is: A. Analyzing transactions B. Posting transactions C. Journalizing transactions D. Adjusting entries
A. Analyzing transactions
Which of the following would be added to the balance per bank on a bank reconciliation? A. Service charges B. Notes collected by the bank C. Outstanding checks D. Deposits in transit
B. Notes collected by the bank
RS Company borrowed $70,000 on December 1 on a 6-month, 12% note. Which statement is true at December 31? A. Both the note payable and the interest payable are current liabilities. B. Neither the note payable nor the interest payable is a current liability. C. The note payable is a current liability, but the interest payable is not. D. The interest payable is a current liability, but the note payable is not.
A. Both the note payable and the interest payable are current liabilities.
Budke Corporation paid dividends of $5,000. As a result of this event, the A. Dividends account was increased by $5,000. B. Dividends account was decreased by $5,000. C. Cash account was increased by $5,000. D. Cash was increased and the Dividends account was decreased by $5,000.
A. Dividends account was increased by $5,000.
Which of the following is not an advantage of a sole proprietorship? A. Limited liability B. No time limit imposed on its existence C. No legal requirements for starting the business D. None of the above
A. Limited Liability
Which of the following would be deducted from the balance per bank on a bank reconciliation? A. Service charges B. Notes collected by the bank C. Outstanding checks D. Deposits in transit
A. Service charges
The amount of stock that may be issued according to the corporation's charter is referred to as the A. authorized stock B. issued stock C. unissued stock D. outstanding stock
A. authorized stock
The expense recognition principle matches: A. expenses with revenues B. creditors with businesses C. customers with businesses D. assets with liabilities
A. expenses with revenues
The calculation of depreciation using the declining-balance method A. ignores salvage value in determining the amount to which a constant rate is applied B. multiplies a constant percentage by the previous year's depreciation expense C. yields an increasing depreciation expense each period D. multiplied a declining percentage by a constant book value
A. ignores salvage value in determining the amount to which a constant rate is applied
The right side of an account A. is the credit side B. shows all the balances of the accounts in the system C. is the correct side D. reflects all transactions for the accounting period
A. is the credit side
Quark Inc. just began business and made the following four inventory purchases in June: June 1 150 units $825 June 10 200 units $1,120 June 15 200 units $1,140 June 28 150 units $885 $3,970 A physical count of merchandise on June 30 reveals that there are 200 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory for June is A. $1,180 B. $1,170 C. $1,100 D. $1,105
B. $1,170 Solution: The total units purchased in June was 700. 700-200=500, meaning that 500 units were sold. FIFO (first in, first out) requires that the first 500 units that were purchased are the first 500 to go. Therefore, all 150 units from June 1st are gone, totaling $825 and 150 units gone. Next, all 200 units from June 15th are gone. Totaling $1,945 ($825+$1,120) and 350 units gone (150+200) 150 more units must be sold. So, we divide June 15th's purchase totaling $1,140 and divide it by the 200 units. This gives us a price of $5.70 per unit. Multiply $5.70 by 150, because we only need 150 more units. This equals $855. This totals $2,800 ($1,945+$855) and 500 units. Lastly, subtract the $2,800 from the $3,970 (given in the question) to get your answer of $1,170.
Morgan Company does not ring up sales taxes separately on the cash register. Total receipts for February amounted to $25,440. If the sales tax rate is 6%, what amount must be remitted to the state for February's sales taxes? A. $1,527 B. $1,440 C. $1,435 D. It cannot be determined.
B. $1,440 Solution: Add 100% to the sales tax rate. Then divide the total receipts by this percentage. Subtract this number from the total receipts. 100%+6%=106% (1.06 as a decimal) $25,440/1.06=$24,000 $25,440-$24,000=$1,440
Hogan Industries had the following inventory transactions occur during 2014: units cost/unit Feb 1 2014 Purchase 36 $45 Mar 14 2014 Purchase 62 $47 May 1 2014 Purchase 44 $49 The company sold 102 units at $63 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company's gross profit using LIFO? (rounded to whole dollars) A. $4,730 B. $1,544 C. $4,882 D. $1,696
B. $1,544 Solution: LIFO requires that the last units that came in are the first ones to go. Therefore, all 44 units purchased on May 1st are gone, totaling $2,156 (44x$49) and 44 units. Next, 58 out of the 62 units purchased on March 14th will be gone to total the 102 units. 58x$47=$2,726. Add this number to the previous total to get $4,882 and 102 units. The company sold 102 units for $63 each. So, 102x$63=$6,426. $6,426-$4,882=$1,544, which is the gross profit. The tax rate is not calculated in gross profit.
N3 Corporation has assets of $3,000,000, common stock of $780,000, and retained earnings of $475,000. What are the creditors' claims on their assets? A. $3,305,000 B. $1,745,000 C. $2,695,000 D. $1,255,000
B. $1,745,000 Solution: Add common stock to retained earnings. Then, subtract this sum from assets. $475,000+$780,000=$1,255,000 $3,000,000-$1,255,000=$1,745,000
As of January 1, 2013, Elena's Store had a balance in its retained earnings account of $100,000. During the year Elena's Store had revenues of $80,000 and expenses of $45,000. In addition, the business paid cash dividends of $20,000. What is the balance in Retained Earnings at December 31, 2013 for Elena's Store? A. $100,000 B. $115,000 C. $135,000 D. $155,000
B. $115,000 Solution: Subtract expenses and paid cash dividends from revenues. Add this number to retained earnings. $80,000-$45,000-$20,000=$15,000 $100,000+$15,000=$115,000
Pearson Company bought a machine on January 1, 2014. The machine cost was $144,000 and had an expected salvage value of $24,000. The life of the machine was estimated to be 5 years. The depreciable cost of the machine is A. $144,000 B. $120,000 C. $40,000 D. $24,000
B. $120,000 Solution: Depreciable cost is simply Purchase Price-Salvage Value. In this case, $144,000-$24,000=$120,000 The useful life is irrelevant to this question, don't let it confuse you.
What is the total stockholders' equity based on the following account balances? Common Stock $1,800,000 Paid-In Capital in Excess of Par $ 120,000 Retained Earnings $ 570,000 Treasury Stock $ 60,000 A. $2,190,000 B. $2,430,000 C. $2,550,000 D. $1,680,000
B. $2,430,000 Solution: Stockholders' equity=assets-liabilities Common stock, Paid-In Capital in Excess of Par, and Retained Earnings all increase stockholders' equity, while Treasury Stock decreases it. So, ($1,800,000+$120,000+$570,000)-$60,000=$2,430,000
Tina's Boutique has total receipts for the month of $24,255 including sales taxes. If the sales tax rate is 5%, what are Tina's sales for the month? A. $23,043 B. $23,100 C. $24,255 D. It cannot be determined
B. $23,100 Solution: Divide the total receipts by the sales tax rate plus 100%. In this question, 5%+100%=105% (1.05 as a decimal) $24,255/1.05=$23,100
At September 1, 2014, Baxter Inc. reported Retained Earnings of $282,000. During the month, Baxter generated revenues of $40,000, incurred expenses of $24,000, purchased equipment for $10,000 and paid dividends of $4,000. What is the balance in Retained Earnings at September 30, 2014? A. $16,000 credit B. $294,000 credit C. $282,000 debit D. $284,000 credit
B. $294,000 credit Solution: Retained earnings=Beginning retained earnings+Net income-Cash Dividends. Net income=Revenue-Expenses. In this case, net income is $16,000 ($40,000-$24,000). Therefore, retained earnings is ($282,000+$16,000)-$4,000, totaling to $294,000. The $10,000 was for purchased equipment in irrelevant to this question and is only there to try and throw you off.
Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $45,000. If the balance of the Allowance for Doubtful Accounts is $11,000 debit before adjustment, what is the balance after adjustment? A. $56,000 B. $45,000 C. $34,000 D. $11,000
B. $45,000 Solution: Estimated Uncollectible Accounts-Allowance for Doubtful Accounts=Bad Debt Expense $45,000-$11,000=$34,000 Ending allowance for bad debt expense=$34,000+$11,000=$45,000 Percentage of receivables method is a balance sheet approach to bad debts estimation. It calculates bad debts as a percentage of ending accounts receivable.
Equipment with a cost of $225,000 has an estimated salvage value of $15,000 and an estimated life of 4 years or 10,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 2,700 hours? A. $56,250. B. $52,500. C. $56,700. D. $54,375.
B. $52,500. Solution: ($225,000 − $15,000) ÷ 4 = $52,500
In the first month of operations, the total of the debit entries to the Cash account amounted to $1,400 and the total of the credit entries to the Cash account amounted to $800. The Cash account has a A. $600 credit balance B. $600 debit balance C. $800 credit balance D. $1,400 debit balance
B. $600 debit balance Solution: Debits increase the cash account, while credits lower it. Therefore, if it had a $1,400 debit balance, an $800 credit to the account would decrease it by $800. So, $1,400 debit-$800 credit=$600 debit
Rains Company purchased equipment on January 1 at a list price of $75,000, with credit terms 2/10, n/30. Payment was made within the discount period. Rains paid $3,750 sales tax on the equipment, and paid installation charges of $1,320. Prior to installation, Rains paid $3,000 to pour a concrete slab on which to place the equipment. What is the total cost of the new equipment? A. $78,750. B. $81,570. C. $83,070. D. $75,750.
B. $81,570. Solution: ($75,000 × .98) + $3,750 + $1,320 + $3,000 = $81,570
Tanner, Inc. issued a 10%, 5-year, $100,000 bond when the market rate of interest was 12%. At what value will the bond sell? A. A premium B. A discount C. Par D. Face value
B. A discount
Which of the following is not classified properly as a current asset? A. A fund to be used to purchase a building within the next year B. A receivable from the sale of an asset to be collected in two years C. Debt investments D. Supplies
B. A receivable from the sale of an asset to be collected in two years
Collection of a $600 Accounts Receivable A. Decreases an asset $600; decreases a liability $600 B. Increases an asset $600; decreases an asset $600 C. Increases an asset $600; decreases a liability $600 D. Decreases a liability $600; increases stockholders' equity $600
B. Increases an asset $600; decreases an asset $600 Explanation: a collection of Accounts receivable will increase cash (an asset) but decrease accounts receivable (also an asset). Therefore, one asset is increased while another is decreased.
Inventory becomes part of cost of goods sold when a company A. Purchases the inventory B. Sells the inventory C. Receives payment from the customer D. Pays for the inventory
B. Sells the inventory
A promissory note A. is not a formal credit instrument. B. may be used to settle an accounts receivable. C. has the party to whom the money is due as the maker. D. cannot be factored to another party.
B. may be used to settle an accounts receivable.
Charlene Cosmetics Company just began business and made the following four inventory purchases in June: June 1 150 units $ 780 June 10 200 units $1,170 June 15 200 units $1,260 June 28 150 units $ 990 Total: $4,200 A physical count of merchandise inventory on June 30 reveals that there are 210 units on hand. Using the average cost method, the amount allocated to the ending inventory on June 30 is A. $1,323 B. $1,229 C. $1,260 D. $1,368
C. $1,260 Solution: The average cost method has you take the total money spent on inventory purchases ($4,200) and divide it by the total number of units bought (700). So, $4,200/700= $6. This means that, on average, each unit costs $6. You take the quotient ($6) and multiply it by the units in hand (210) to get your answer. So, $6(210)= $1,260
The right to receive money in the future is called a(n) A. Liability B. Revenue C. Account Receivable D. Account Payable
C. Account Receivable
If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a sales A. Contra Asset B. Discount C. Allowance D. Return
C. Allowance
Apple-A-Day Company has the following inventory data: July 1 Beginning inventory 20 units at $20 $ 400 July 7 Purchases 70 units at $21 $1,470 July 22 Purchases 10 units at $22 $ 220 $2,090 A physical count of merchandise inventory on July 30 reveals that there are 25 units on hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for July is A. $1,590 B. $1,540 C. $1,585 D. $1,555
C. $1,585 Solution: The total units in July was 100. If only 25 were left on hand, then 75 units were sold (100-25). The LIFO (last in, first out) method requires that the last 75 units that were purchased are the first 75 to go. Therefore, all 10 units purchased on July 22nd are gone, totaling $220 and 10 units. There are still 65 units that must be accounted for. Therefore, we take 65 out of the 70 units that were purchased and multiply that by $21 (because that is the price per unit of that purchase). 65($21)= $1,365. Adding this to the previos $220 and 10 units, we get $1,585 and all 75 units sold.
The Accounts Receivable account has a beginning balance of $52,000 and an ending balance of $69,000. If $42,000 was sold on account during the year, what were the total collections on account? A. $79,000 B. $69,000 C. $25,000 D. $59,000
C. $25,000 Solution: Add the amount sold on account to the beginning balance. Then subtract the ending balance from this number. $52,000+$42,000=$94,000 $94,000-$69,000=$25,000
Scribner Company issued $400,000 of 8%, 5-year bonds at 106. Assuming straight-line amortization and annual interest payments, how much bond interest expense is recorded on the next interest date? A. $32,000 B. $36,800 C. $27,200 D. $4,800
C. $27,200 The total interest paid is $136,000 over the course of 5 years. Divide $136,000 by 5 and you will get your answer of $27,200
Whyte Clinic purchases land for $280,000 cash. The clinic assumes $3,000 in property taxes due on the land. The title and attorney fees totaled $2,000. The clinic had the land graded for $4,400. What amount does Whyte Clinic record as the cost for the land? A. $284,400. B. $280,000. C. $289,400. D. $285,000.
C. $289,400 Solution: $280,000 + $3,000 + $2,000 + $4,440 = $289,400
In 2014 Wilkinson Company had net credit sales of $1,500,000. On January 1, 2014, Allowance for Doubtful Accounts had a credit balance of $36,000. During 2014, $60,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivables basis). If the accounts receivable balance at December 31 was $400,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2014? A. $ 40,000 B. $150,000 C. $64,000 D. $60,000
C. $64,000 Solution: ($400,000 × .10) + ($60,000 − $36,000) = $64,000
Conway Company purchased merchandise inventory with an invoice price of $9,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Conway Company pays within the discount period? A. $8,100 B. $8,280 C. $8,820 D. $9,000
C. $8,820 Solution: Multiply the invoice price by the percent of the cash discount. Then, subtract the product of that from the invoice price. $9,000(2/10)=$180. $9,000-$180=$8,820
A company purchased office equipment for $30,000 and estimated a salvage value of $6,000 at the end of its 10-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method used is A. 10% B. 15% C. 20% D. 2%
C. 20%
The following data is available for BOX Corporation at December 31, 2014: Common stock, par $10 (authorized 30,000 shares) $250,000 Treasury stock (at cost $15 per share) $ 1,200 Based on the data, how many shares of common stock are outstanding? A. 30,000 B. 25,000 C. 29,920 D. 24,920
C. 29,920 Solution: Divide the total cost of treasury stock by its cost per share. Then, subtract this number from the authorized number of common stock shares. $1,200/$15=80 30,000-80=29,920
A balance sheet shows A. Revenues, expenses, and dividends. B. Revenues, liabilities, and stockholders' equity. C. Assets, liabilities, and stockholders' equity. D. Expenses, dividends, and stockholders' equity.
C. Assets, liabilities, and stockholders' equity.
The account Allowance for Doubtful Accounts is classified as a(n) A. contra account of Bad Debt Expense B. Expense C. Contra account to Accounts Receivable D. Liability
C. Contra account to Accounts Receivable
The term "FOB" denotes A. Freight on board B. Freight charge on buyer C. Free on board D. free only (to) buyer
C. Free on board
A corporation issued a $50,000, 9%, 4-month note on July 1. The corporation's year-end is September 30. Which one of the following is the adjusting entry for interest on September 30? A. Interest Expense $1,125; Notes Payable $1,125 B. Interest Expense $1,500; Notes Payable $1,500 C. Interest Expense $1,125; Interest Payable $1,125 D. Interest Expense $1,500; Interest Payable $1,500
C. Interest Expense $1,125;Interest Payable $1,125 Solution: Interest is calculated by multiplying the principal times the annual interest rate times the time period the note is outstanding. $50,000 × 9% × 3/12 = $1,125
Assets purchased for resale are recorded in which of the following accounts? A. Equipment B. More than one of these choices is correct C. Inventory D. Supplies
C. Inventory
Which of the following is NOT one of the three forms of business organizations? A. Proprietorships B. Corporations C. Investors D. Partnerships
C. Investors
What is the effect of amortizing a bond discount? A. It decreases bond interest expense. B. It decreases the maturity value of the bonds. C. It increases the carrying value of the bonds. D. There is no effect on the bond interest expense.
C. It increases the carrying value of the bonds. (because as the discount is reduced, the net amount, or carrying value increases.)
A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be recognized? A. December 5 B. December 10 C. November 30 D. December 1
C. November 30
If common stock is issued for an amount greater than par value, the excess should be credited to A. Cash B. Retained Earnings C. Paid-in Capital in Excess of Par Value D. Legal Capital
C. Paid-in Capital in Excess of Par Value
In the credit terms of 1/10, n/30, the "1" represents the A. Number of days when the entire amount is due B. Number of days in the discount period C. Percent of the cash discount D. Full amount if the invoice
C. Percent of the cash discount
Under the allowance method of accounting for bad debts, why must uncollectible accounts receivable be estimated at the end of the accounting period? A. To determine the gross realizable value of accounts receivable. B. The IRS rules require the company to make the estimate. C. To match bad debt expense to the period in which the revenues were earned. D. To allow the collection department to schedule work for the next accounting period.
C. To match bad debt expense to the period in which the revenues were earned.
For the basic accounting equation to stay in balance, each transaction recorded must A. affect the same number of asset and liability accounts B. affect two or less accounts C. affect two or more accounts D. affect exactly two accounts
C. affect two or more accounts
If the market rate of interest is greater than the contractual rate of interest, bonds will sell A. at a premium B. at face value C. at a discount D. only after the stated rate of interest is increased
C. at a discount
The book value of a plant asset is the difference between the A. replacement cost of the asset and its historical cost B. cost of the asset and the amount of depreciation expense for the year C. cost of the asset and the accumulated depreciation to date D. proceeds received from the sale of the asset and its original cost
C. cost of the asset and the accumulated depreciation to date
Each of the following is a major type (or category) of an adjusting entry EXCEPT: A. accrued revenues B. accrued expenses C. earned expenses D. prepaid expenses
C. earned expenses
Recording depreciation each period is necessary in accordance with the A. going concern principle. B. historical cost principle. C. expense recognition principle. D. asset valuation principle.
C. expense recognition principle.
Liabilities are classified on the balance sheet as current or A. deferred B. unearned C. long-term D. accrued
C. long-term
An adjusted trial balance: A. is a required financial statement under generally accepted accounting principles B. cannot be used to prepare financial statements C. proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made D. is prepared after the financial statements are completed
C. proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made
A bank statement A. is a bill from the bank for services rendered B. lets a depositor know the financial position of the bank as of a certain date C. shows the activities that increased or decreased the depositor's account balance D. is a credit reference letter written by the depositor's bank
C. shows the activities that increased or decreased the depositor's account balance
A $500,000 bond is retired at 101¼ when the unamortized premium is $4,500. Which of the following is one effect of recording the retirement? A. $6,250 gain B. $6,250 loss C. $10.806 loss D. $1,750 loss
D. $1,750 loss The bonds were retired for $506,250 ($500,000 × 101¼%) and the carrying value is $504,500, resulting in a loss of $1,750.
An analysis and aging of the accounts receivable of Watts Company at December 31 reveal these data: Accounts receivable $2,400,000 Allowance for doubtful accounts per books before adjustment (credit) $ 150,000 Amounts expected to become uncollectible $ 195,000 What is the cash realizable value of the accounts receivable at December 31 after adjustment? A. $2,055,000 B. $2,250,000 C. $2,400,000 D. $2,205,000
D. $2,205,000 Solution: $2,400,000 − $195,000 = $2,205,000
Winrow Company showed the following balances at the end of its first year: Cash $11,000 Prepaid insurance $ 500 Accounts receivable $ 2,500 Accounts payable $ 2,000 Notes payable $ 3,000 Common stock $ 5,000 Dividends $ 500 Revenues $17,000 Expenses $12,500 What did Winrow Company show as total credits on its trial balance? A. $26,500 B. $27,500 C. $28,000 D. $27,000
D. $27,000 Solution: Add all the credit accounts together. Accounts payable+Notes Payable+Common Stock+Revenues So, $2,000+$3,000+$5,000+$17,000=$27,000
Bonds with a face value of $300,000 and a quoted price of 102 1/4 have a selling price of A. $360,675 B. $306,075 C. $300,675 D. $306,750
D. $306,750 Solution: Multiply the face value by the quoted price (Think of quoted price as a percent....so a quoted price of 101 would be 1.01). So, in this case, a quoted price of 102 1/4=1.0225 $300,000(1.0225)=$306,750
Clark Company developed the following reconciling information in preparing its September bank reconciliation: Cash balance per bank, 9/30 $30,800 Note receivable collected by bank $16,800 Outstanding checks $25,200 Deposits in transit $12,600 Bank service charge $ 210 NSF check $ 3,360 Using the above information, determine the cash balance per books (before adjustments) for the Clark Company. A. $42,000 B. $27,370 C. 43, 400 D. $4,970
D. $4,970 Solution: Correct Cash Balance = Cash balance per books + Notes Receivable Collected by bank - Bank service charge - NSF Correct Cash Balance=Cash balance per bank+Deposits in transit-Outstanding checks Correct Cash Balance=$30,800+$12,600-$25,200=$18,200 So....$18,200=Cash balance per books+$16,800-$210-$3,360 $18,200=Cash balance per books+$13,230 Subtract $13,230 from both sides to get your answer. $4,970=Cash balance per books
Henson Company began the year with retained earnings of $330,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Henson's retained earnings at the end of the year? A. $790,000 B. $490,000 C. $450,000 D. $410,000
D. $410,000 Solution: Beginning retained earnings+Net income-paid dividends=retained earnings at the end of the year. NOTE: net income=revenues-expenses In this question, retained earnings at the end of the year is calculated as $330,000+($500,000-$380,000)-$40,000=$410,000
The following information was taken from Molina Company cash budget for the month of November: Beginning cash balance $ 96,000 Cash receipts $ 116,000 Cash disbursements $160,000 If the company has a policy of maintaining an end-of-the-month cash balance of $80,000, the amount the company would have to borrow is A. $0 B. $28,000 C. $80,000 D. $44,000
D. $44,000 Solution: $96,000-($96,000+$116,000-$160,000) $96,000-$52,000=$44,000
Financial information is presented below: Operating Expenses $ 36,000 Sales Revenue $150,000 Cost of Goods Sold $105,000 Gross profit would be A. $24,000 B. $114,000 C. $36,000 D. $45,000
D. $45,000 Solution: Gross profit is the difference between sales revenue and cost of goods sold. So, in this case, it's $150,000-$105,000=$45,000
Given the following adjusted trial balance: Debit Credit Cash $ 781 Accounts receivable $1,049 Inventory $1,562 Prepaid rent $ 43 Equipment $ 150 Accumulated Depreciation-Equipment $ 26 Accounts Payable $ 41 Unearned service revenue $ 61 Common stock $ 103 Retained earnings $3,305 Service revenue $ 134 Interest revenue $ 28 Salaries and wages expense $ 80 Travel expense $ 33 Total $3,698 $3,698 Net income for the year is: A. $135 B. $162 C. $248 D. $49
D. $49 Solution: net income=gross income-expenses Service revenue and interest revenue make up gross income Salaries and wages expense and travel expense make up expenses. So, gross income is $134+$28=$162. Expenses are $80+$33=$113 Net income is $162-$113=$49
Use the following data to determine the total dollar amount of assets to be classified as property, plant, and equipment. Koonce Office Supplies Balance Sheet December 31, 2014 Cash $ 130,000 Accounts Receivable $ 100,000 Inventory $ 110,000 Prepaid Insurance $ 60,000 Stock Investments $ 170,000 Land $ 180,000 Buildings $210,000 Less:Accumulated Depreciation (40,000) $ 170,000 Trademarks $ 140,000 Total Assets $1,060,000 Accounts Payable $ 140,000 Salaries and wages payable $ 20,000 Mortgage payable $ 160,000 Total liabilities $ 320,000 Common Stock $ 240,000 Retained Earnings $ 500,000 Total stockholders' equity $ 740,000 Total liabilities and stockholders' equity $1,060,000 A. $340,000 B. $290,000 C. $400,000 D. $570,000
D. $570,000 Solution: Add all the current assets together (Cash, accounts receivable, inventory, prepaid insurance and stock investments) $130,000+$100,000+$110,000+$60,000+$170,000=$570,000
A machine was purchased for $180,000 and it was estimated to have an $12,000 salvage value at the end of its useful life. Monthly depreciation expense of $1,400 was recorded using the straight-line method. The annual depreciation rate is A. 12%. B. 2%. C. 8%. D. 10%.
D. 10% Solution: ($1,400 × 12) ÷ ($180,000 − $12,000) = 10%
Which of the following is NOT a liability? A. Interest Payable B. Unearned Service Revenue C. Accounts Payable D. Accounts Receivable
D. Accounts Receivable
A book value of an asset is equal to the A. Asset's fair value less its historical cost B. Blue book value relied on by secondary markets C. Replacement cost of the asset D. Asset's cost less accumulated depreciation
D. Asset's cost less accumulated depreciation
A gain or loss on disposal of a plant asset is determined by comparing the A. Replacement cost of the asset with the asset's original cost B. Book value of the asset with the asset's original cost C. Original cost of the asset with the proceeds received from its sale D. Book value of the asset with the proceeds received from its sale
D. Book value of the asset with the proceeds received from its sale
What organization issues U.S. accounting standards? A. Security Exchange Commission B. International Accounting Standards Committee C. International Auditing Standards Committee D. Financial Accounting Standards Board
D. Financial Accounting Standards Board
Par value A. Represents what a share of stock is worth B. Represents the original selling price for a share of stock C. Is established for a share of stock after it is used D. Is the value assigned per share in the corporate charter
D. Is the value assigned per share in the corporate charter
Debts and obligations of a business are referred to as A. Equities B. Expenses C. Assets D. Liabilities
D. Liabilities
Bonds payable with a face value of $200,000 and a carrying value of $196,000 are redeemed prior to maturity at 102. Which of the following will result? A. Gain on redemption of $8,000 B. Loss on redemption of $4,000 C. Gain on redemption of $4,000 D. Loss on redemption of $8,000
D. Loss on redemption of $8,000 Solution: The company had to pay $204,000 for bonds with a carrying value of $196,000. The difference between the $204,000 and $196,000 is the loss on redemption. $204,000-$196,000=$8,000
Which of the following would NOT be included in the definition of cash? A. Coins B. Petty cash C. Money on deposit in a bank D. NSF checks
D. NSF checks
Gross profit equals the difference between A. Sales revenue and operating expenses B. Net income and operating expenses C. Sales revenue and cost of goods sold plus operating expenses D. Sales revenue and cost of goods sold
D. Sales revenue and cost of goods sold
The Jacksonville Jaguars sell season tickets to NFL football games. There are 10 home games during the season, which runs from August through December. During February, 65,000 season tickets were sold for $12,000,000 cash. Which account will be credited by the Jacksonville Jaguars upon receipt of the $12,000,000? A. Tickets Receivable B. Prepaid Tickets C. Ticket Revenue D. Unearned Ticket Revenue
D. Unearned Ticket Revenue
An adjusting entry: A. affects two income statement accounts B. is always a compound entry C. affects two balance sheet accounts D. affects a balance sheet account and an income statement accounts
D. affects a balance sheet account and an income statement accounts
The balance in the Accumulated Depreciation account represents the: A. cash fund to be used to replace plant assets B. amount to be deducted from the cost of the plant asset to arrive at its fair market value C. amount charged to expense in the current period D. amount charged to expense since the acquisition of the plant asset
D. amount charged to expense since the acquisition of the plant asset
Current liabilities are due A. but not receivable for more than one year B. but not payable for more than one year C. and receivable within one year D. and payable within one year
D. and payable within one year
Accounts receivable are valued and reported on the balance sheet A. only if they are not past due B. in the investments section C. at gross amounts less sales returns and allowances D. at cash realizable value
D. at cash realizable value
Treasury stock is a(n) A. contra asset account B. retained earnings account C. asset account D. contra stockholders' equity
D. contra stockholders' equity
Sales taxes collected by a retailer are reported as A. contingent liabilities B. revenues C. expenses D. current liabilities
D. current liabilities
An aging of a company's accounts receivable indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,600 credit balance, the adjustment to record bad debts for the period will require a A. credit to Allowance for Doubtful Accounts for $4,500 B. debit to Bad Debt Expense for $4,500 C. debit to Allowance for Doubtful Accounts for $2,900 D. debit to Bad Debts Expense for $2,900
D. debit to Bad Debts Expense for $2,900 Subtract $1,600 from the $4,500 to get $2,900. It is a debit to Bad Debts expense because the Allowance for Doubtful Accounts is a credit
Regular dividends are declared out of A. paid-in capital in excess of par value B. treasury stock C. common stock D. retained earnings
D. retained earnings
The best interpretation of the word "credit" is A. increase side of an account B. decrease side of an account C. offset side of an account D. right side of an account
D. right side of an account
If an account is collected after having been previously written off A. the allowance account should be debited. B. only the control account needs to be credited. C. both income statement and balance sheet accounts will be affected. D. there will be both a debit and a credit to accounts receivable.
D. there will be both a debit and a credit to accounts receivable.