ACCT 2301 - Midterm Review

A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 8, it paid the full amount due. The amount of the cash paid on July 8 equals

$1,568

On December 31, there were 26 units remaining in ending inventory. Using the perpetual LIFO inventory costing method, what is the cost of the ending inventory?

$3,364

On December 31, there were 26 units remaining in ending inventory. Using the perpetual FIFO inventory costing method, what is the cost of the ending inventory?

$3,540

On December 31, there were 26 units remaining in ending inventory. These 26 units consisted of 2 from January, 4 from February, 6 from May, 4 from September, and 10 from November. Using the specific identification method, what is the cost of the ending inventory?

$3,800

Cushman company had $800,000 in sales, sales discounts of $12,000, sales returns and allowances of $18,000, Cost of Goods sold of $380,000 and $275,000 in operating expenses. Gross profit equals

$390,000

If equity is $300,000 and liabilities are $192,000, then assets equal:

$429,000

On May 1, a two-year insurance policy was purchased for $18,000 with coverage to begin immediately. What is the amount of insurance expense that would appear on the company's income statement for the first year ended in December 31?

$6,000

Fragmental Co. leased a portion of its store to another company for eight months beginning in October 1, at a monthly rate of $800. Fragmental collected the entire $6,400 cash on October 1 and recorded it as unearned revenue. Assuming adjusting entries are only made at year-end, the adjusting entry made by Fragmenta Co. December 31 would be:

A debit to Unearned rent and a credit to Rent revenue for $2,400

A business uses a credit to record

A decrease in an asset account

A company's ledger is:

A record containing all accounts and their balance used by the company

Assets created by selling goods and services on credit are:

Accounts Receivable

Identify the account below that is classified as an asset in a company's chart of accounts:

Accounts Receivable

The adjusting trial balance contains information pertaining to

All general ledger accounts

Accounts payable appear on which of the following statements?

Balance Sheet

Which of the following is not true regarding a Certified Public Accountant?

Cannot hold any other certificate other than a CPA

Which of the following does not require an adjusting entry at year-end?

Cash invested in stockholders

Cost included in the merchandise inventor account include all of the following except

Damaged inventory that cannot be sold

On March 12, Klein company sold merchandise in the amount of $7,800 to Babson company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Klein uses the perpetual inventory system and the gross method of accounting for sales. On Marhc 15, Babson returns some of the merchandise, which is not defective. The selling price of the returned merchandise is $600 and the cost of the merchandise returned is $350. What is the correct journal entry?

Debit Sales returns and allowances $600 credit accounts receivable $600 Debit Merchandise inventory $350 Credit Cost of goods sold $350

A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 12, it paid the full amount due. Assuming the company uses a perpetual inventory system, and records purchases using the gross method, the correct journal entry to record the payment on July 12 is

Debit accounts payable $1,600 and credit merchandise inventory $32 and credit cash $1,568

On March 12, Klein company sold merchandise in the amount of $7,800 to Babson company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Klein uses the perpetual inventory system and the gross method of accounting for sales. What is the correct journal entry?

Debit accounts receivable $7,800 and credit sales $7,800

A physical count of supplies on hand at the end of May for Masters, Inc. indicated $1,250 of supplies on hand. The general ledger balance before any adjustment is $2,100. What is the adjusting entry for office supplies that should be recorded on May 31?

Debit supplies expense $850 and credit supplies $850

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is:

Debit unearned legal fees and credit legal fees earned

Gloria Catering provided $1,000 of catering services and billed its client for the amount owed. Determine the journal entry that is needed.

Debit: Accounts Receivable Credit: Catering Revenue

Smart Consulting, paid cash dividends of $2,000 to its common stockholders. Determine the correct journal entry.

Debit: Dividends Credit: Cash

Russel Co. received a $400 utility bill for the current month's electricity. It is not due until the end of the next month which is when they intend to pay it. Determine the correct journal entry.

Debit: Utilities Expense Credit: Accounts Payable

The periodic expense created by allocating the cost of a plant and equipment to the periods in which they are used, representing the expense of using the asssts, is called

Depreciated expense

Outflows of cash and other resources to stockholders are:

Dividends

The accounting equation for Long Company shows an increase in its assets and an increase in its liabilities. Which of the following transactions could have caused that effect?

Equipment was purchased on credit

The Securities and Exchange Commission (SEC) has given the task of setting GAAP to the:

FASB

The inventory valuation method that has the advantages of assigning an amount to inventory on the balance sheet that approximates its current cost, and also mimics the actual flow of goods for most businesses is

FIFO

During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is:

FIFO method

True or False? Adjusting entries affect only balance sheet accounts.

False

The amount recorded for merchandise inventory includes all of the following except:

Freight cost paid by the seller

Which of the following statements regarding gross profit is not true?

Gross Profit is not calculated on the multi-step income statement

A partnership

Has unlimited liability for its partners

Unearned revenues are generally:

Liabilities created when a customer pays in advance for products or services before the revenue is earned.

Generally accepted accounting principles require that the inventory of a company be reported at

Lower of cost or market

The area of accounting aimed at servicing the decision making needs of internal users is

Managerial accounting

Which of the following statements regarding merchandise inventory is not true?

Merchandise inventory appears on the balance sheet of a service company

If a company uses $1300 of its cash to purchase supplies, the effect of the accounting equation would be:

One asset increases $1300 of its cash to purchase supplies, and another asset decreases $1300, causing no effects

Which of the following factors are part of the Fraud Triangle?

Opportunity, Pressure, and Rationalization

The process of transferring general journal entry information to the ledger is called

Posting

Which of the following statements regarding sales returns and allowances is not true?

Sales returns and allowances do not have an impact on gross profit

All of the following statements regarding the financial statement impact of inventory costing are true except?

Selected costing method does not impact net income

Which of the following is not an asset account?

Services Revenue

Which of the following inventory costing methods will also result in the same values for ending inventory and cost of goods sold regardless of whether a perpetual or periodic inventory system is used

Specific Identification and FIFO

The basic financial statements include all of the following except:

Statement of changes in assets

While in the process of posting from the journal to the ledger, a company failed to post a $500 debit to the Equipment account. What will the effect of this error?

The trial balance would not balance

A credit used to record an increase in all of the following accounts except

Wages Expense

Adjusting entries

affect both the income statement and balance sheet accounts

On December 1, Milton Company borrowed $300,000 at 8% annual interest, from the Tennessee Nation Bank. Interest is paid when the loan matures one year from the issue date. What is the adjusting entry for accruing interest that Milton would need to make on December 31, the calendar year-end?

debit interest expense $2,000 and credit interest payable $2,000

A debit

is always the left hand side of a T-account

A debit to sales returns and allowances and a credit to accounts receivable

recognizes that a customer returned merchandise and/or recieved an allowance