Exam 1 ACG (Prototype)

Chase Company uses the perpetual inventory method. The inventory records for Chase reflected the following January 1Beginning inventory300 units @ $2.30January 12Purchase400 units @ $2.10January 18Sales500 units @ $3.80January 21Purchase300 units @ $2.40January 25Purchase100 units @ $2.20January 31Sales450 units @ $3.80 Assuming Chase uses a LIFO cost flow method, the amount of cost of goods sold for the sales transaction on January 18 is:

$1,070

At March 31, Cummins Company had a balance in its cash account of $10,600. At the end of March, the company determined that it had outstanding checks of $1,145, deposits in transit of $710, a bank service charge of $40, and an NSF check from a customer for $225. The true cash balance at March 31 is:

$10,335

Owen Company's unadjusted book balance at June 30 is $9,700. The company's bank statement reveals bank service charges of $45. Two credit memos are included in the bank statement: one for $900, which represents a collection that the bank made for Owen, and one for $50, which represents the amount of interest that Owen had earned on its interest-bearing account in June. Based on this information, Owen's true cash balance is:

$10,605

Assume the perpetual inventory method is used. The company purchased $13,400 of merchandise on account under terms 4/10, n/30. The company returned $2,900 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 $20,800 cash. What is the net cash flow from operating activities as a result of the four transactions?

$10,720

The year-end financial statements of 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:

$14,400

Anchor Company purchased a manufacturing machine with a list price of $160,000 and received a 2% cash discount on the purchase. The machine was delivered under terms Free On Board shipping point, and freight costs amounted to $2,400. Anchor paid $3,000 to have the machine installed and tested. Insurance costs to protect the asset from fire and theft amounted to $3,600 for the first year of operations. Based on this information, the amount of cost recorded in the asset account would be:

$162,200

Lexington Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1) Acquired $4,500 cash from issuing common stock. 2) Borrowed $2,950 from a bank. 3) Earned $3,850 of revenues. 4) Incurred $2,550 in expenses. 5) Paid dividends of $550. Lexington Company engaged in the following transactions during Year 2: 1) Acquired an additional $1,250 cash from the issue of common stock. 2) Repaid $1,825 of its debt to the bank. 3) Earned revenues, $5,250. 4) Incurred expenses of $3,050. 5) Paid dividends of $1,540. Total liabilities on Lexington's balance sheet at the end of Year 1 equal:

$2,950

The inventory records for Radford Company reflected the following Beginning inventory on May 1300 units @ $2.20First purchase on May 7400 units @ $2.40Second purchase on May 17600 units @ $2.50Third purchase on May 23200 units @ $2.60Sales on May 311,200 units @ $4.10 What is the amount of cost of goods sold assuming the LIFO cost flow method is used?

$2,980

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:

$227,700

Riley Company borrowed $16,000 on April 1, Year 1 from the Titan Bank. The note issued by Riley carried a one year term and a 5% annual interest rate. Riley earned cash revenue of $820 in Year 1 and $430 in Year 2. Assume no other transactions. The amount of net income on the Year 2 income statement would be:

$230

The April 30 bank statement for Trimble Corporation shows an ending balance of $37,626. The unadjusted cash account balance was $31,350. The accountant for Trimble gathered the following information: There was a deposit in transit for $4,860. The bank statement reports a service charge of $114. A credit memo included in the bank statement shows interest earned of $495. Outstanding checks totaled $12,525. The bank statement included a $1,770 NSF check deposited in April. What is the true cash balance as of April 30?

$29961

Blair Scott started a sole proprietorship by depositing $41,000 cash in a business checking account. During the accounting period the business borrowed $20,000 from a bank, earned $6,000 of net income, and Scott withdrew $7,200 cash from the business. Based on this information, at the end of the accounting period Scott's capital account contained a balance of:

$39,800

The balance sheet of Flo's Restaurant showed total assets of $560,000, liabilities of $184,000 and stockholders' equity of $376,000. An appraiser estimated the fair value of the restaurant assets at $665,000. If Alice Company pays $905,000 cash for the restaurant the amount of goodwill acquired would be:

$424,000

On March 1, Bartholomew Company purchased a new stamping machine with a list price of $70,000. The company paid cash for the machine; therefore, it was allowed a 5% discount. Other costs associated with the machine were: transportation costs, $1,300; sales tax paid, $3,120; installation costs, $1,000; routine maintenance during the first month of operation, $1,200. The cost recorded for the machine was:

$71,920

Prior to closing the accounts, Syracuse Company's accounting records showed the following balances: Retained earnings$ 8,600Service revenue9,250Interest revenue1,600Salaries expense6,100Operating expense2,150Interest expense1,300Dividends1,900 After closing the accounts, Syracuse's retained earnings balance would be

$8,000

Warren Enterprises had the following events during Year 1: The business issued $40,000 of common stock to its stockholders. The business purchased land for $24,000 cash. Services were provided to customers for $32,000 cash. Services were provided to customers for $10,000 on account. The company borrowed $32,000 from the bank. Operating expenses of $24,000 were incurred and paid in cash. Salary expense of $1,600 was accrued. A dividend of $8,000 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?

$8,400

Laramie Company paid $800,000 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, $100,000, Building, $740,000, and Office Furniture, $160,000. Based on this information the cost that would be allocated to the land is:

$80,000

The following account balances were drawn from the financial statements of Grayson Company: Cash$ 6,200Accounts payable$ 2,150Accounts receivable$ 3,300Common stock?Land$ 9,800Retained earnings, January 1$ 4,500 Revenue$ 11,300 Expenses$ 8,150 Based on the above information, what is the balance of Common Stock for Grayson Company?

$9,500

On September 30, the bank statement of Fine Company showed a balance of $13,250. The following information was revealed by comparing the bank statement to the cash balance in Fine's accounting records: Deposits in transit amounted to $5,415 Outstanding checks amounted to $9,710 A $780 check was incorrectly drawn on Fine's account NSF checks returned by the bank were $1,280 Bank service charge was $45 Credit memo for $190 for the collection of one of the company's account receivable Based on the above information, the true cash balance was:

$9,735

As of December 31, Year 1, Mason Company had $500 cash. During Year 2, Mason earned $1,200 of cash revenue and paid $800 of cash expenses. What is the amount of cash that would be reported on the balance sheet at the end of Year 2?

$900

Anchor Company purchased a manufacturing machine with a list price of $88,000 and received a 2% cash discount on the purchase. The machine was delivered under terms Free On Board shipping point, and freight costs amounted to $2,800. Anchor paid $3,900 to have the machine installed and tested. Insurance costs to protect the asset from fire and theft amounted to $5,000 for the first year of operations. Based on this information, the amount of cost recorded in the asset account would be:

$92,940

The following are the income statements for Ace and Diamond Companies. AceDiamond Revenue$ 70,000$ 76,000 Cost of goods sold 49,00049,000 Gross margin21,00030,400 Operating expenses9,50012,500 Net income$ 11,50017,900 What are the net income percentages for the above companies?

16.4%; 23.6%

Montana Company was authorized to issue 125,000 shares of common stock. The company had issued 54,000 shares of stock when it purchased 8,500 shares of treasury stock. The number of outstanding shares of common stock was:

45,500

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?

82,500

Use the following account numbers and corresponding account titles to answer the following question. Account NumberAccount Title(1)Cash(2)Merchandise inventory(3)Cost of goods sold(4)Transportation-out(5)Dividends(6)Common stock(7)Selling expense(8)Loss on the 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.

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

Account numbers 3, 4, 7, and 9.

Which of the following represents the impact of a taxable cash sale of $400 on the accounting equation if the sales tax rate is 5%?

An increase to cash for $420, an increase to sales tax payable for $20, and an increase to sales revenue for $400.

Which of the following represents the impact of a taxable cash sale of $900 on the accounting equation if the sales tax rate is 4%?

An increase to cash for $936, an increase to sales tax payable for $36, and an increase to sales revenue for $900.

Jackson Company had a net increase in cash from operating activities of $11,500 and a net decrease in cash from financing activities of $2,050. If the beginning and ending cash balances for the company were $3,700 and $12,700, respectively, what is the net cash change from investing activities?

An outflow or decrease of $450.

How would purchasing prepaid rent be classified?

Asset exchange transaction

While performing its monthly bank reconciliation, the bookkeeper for the Mosaic Company discovered that a check written for $421 for advertising expense was recorded in the firm's books as $241. Which of the following shows the effect of the correcting entry on the financial statements?

Assets (180)Liabilities n/a stkhders equ(180) rev n/a exp 180 net income (180) (180)OA

Wing Company paid $20,000 cash in salaries to its employees. Which of the following shows the impact of this transaction on Wing's accounting equation?

Assets - Liabilities N/a Stk. Equity -

The Yankee Corporation has recently begun to accept credit cards. On July 7, Yankee made a credit card sale of $600. Assume that the credit card fee is recorded on the date of sale and that the credit card company charges a fee of 3%. Which of the following correctly shows the effects of the sale on July 7?

Assets 582 Liabilities n/a equity 582 rev 600 exp 18 net income 582 CF n/a

While performing the monthly bank reconciliation, the bookkeeper for Avon Company made the adjusting entry for a bank service charge of $20. Which of the following correctly shows the effect of the entry on the financial statements?

Assets(20) Liabilities n/a Stkhdrs (20) Rev n/a Exp 20 Net Income (20) CF(20) OA

Mary Company collected cash from an account receivable. Which of the following financial statements are affected by this accounting event?

Balance sheet and the statement of cash flows

Which of the following statements is a reason why a company would buy treasury stock?

Because management believes the market price of stock is undervalued. To have stock available to issue to employees in stock option plans. To avoid a hostile takeover.

Which of the following businesses is most likely to use a specific identification cost flow method?

Car dealership

Which of the following would appear in the investing activities section of the statement of cash flows?

Cash outflow for the purchase of land

How would accountants estimate the amount of a company's uncollectible accounts expense?

Consider new circumstances that are anticipated to be experienced in the future. Compute as a percentage of credit sales. Consult with trade association and business associates.

What documentation issued by a bank increases a company's checking account balance at the bank?

Credit memo

The recognition of depreciation expense acts to:

Decrease assets and stockholders' equity, and does not affect cash flow.

Which of the following terms is used to identify the process of expense recognition for property, plant and equipment?

Depriciation

Which term describes a distribution of the business's assets back to the owners of the business?

Dividend

What types of accounts are "matched" when the matching concept is used in a discussion of accrual accounting?

Expenses and Revenues

Which of the following intangible assets is the value attributable to favorable factors such as reputation, location, and superior products?

Goodwills

Greg Company recognized revenue on account. Which of the following financial statements are affected by this accounting event?

Income statement and balance sheet

Ogilvie Corporation issued 12,000 shares of no-par stock for $40 per share. Ogilvie was authorized to issue 35,000 shares. What effect will this event have on the company's financial statements?

Increase assets by $480,000, increase stockholders' equity by $480,000.

Abbott Company purchased $6,500 of merchandise inventory on account. Abbott uses the perpetual inventory method. How does this transaction affect the financial statements?

Increase inventory and increase accounts payable

If total assets decrease, then which of the following statements is true?

Liabilities, common stock, or retained earnings must decrease

Which of the following statements is true about period costs?

Most period costs are expensed in the period the costs are incurred.

Monthly remittance of sales tax:

Reduces liabilities.

Which of the following is not a component of the fraud triangle?

Reliance

Chow Company earned $2,100 of cash revenue, paid $1,300 for cash expenses, and paid a $350 cash dividend to its stockholders. Which of the following statements is true?

The net cash inflow from operating activities was $800.

During Year 1 China Enterprises experienced the following events: (1) Earned $10,000 of revenue on account (2) Incurred $9,000 of expenses on account Based on this information, which of the following describes the combined effects of both events on the amounts of total assets, net income, and cash flows from operating activities shown on the Year 1 financial statements?

Total Assets $10,000 Net income $1,000 Cash flow from operating activities $0

What happens when a company collects cash from accounts receivable?

Total assets are not affected

The Wilson Company purchased $36,000 of merchandise from the Poole Wholesale Company. Wilson also paid $2,900 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.

Total increases to the inventory account would be $38,900.

The Wilson Company purchased $44,000 of merchandise from the Poole Wholesale Company. Wilson also paid $3,000 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.

Total increases to the inventory account would be $47,000.

Which of the following would be classified as a long-term operational asset?

Trademark

When do the effects of product warranties appear on the statement of cash flows?

When there is a settlement of a warranty claim made by a customer.

Issuing a note payable is a(n):

asset source transaction

Liabilities are shown on the:

balance sheet

The percent of receivables method to estimate uncollectible accounts expense is also known as the:

balance sheet approach

The party who borrows money in a note payable is known as the:

both the maker and issuer

Which is not a typical form or document associated with a bank checking account?

debit memo

The year-end adjusting entry to recognize uncollectible accounts expense will:

decrease assets and decrease stockholders' equity.

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

decrease in assets decrease in equality, increase in expenses, decrease in income

On January 1, Year 1, the Vanguard Company purchased a copyright for $12,000. Vanguard estimated the remaining useful life of the copyright to be 6 years. Which of the following correctly shows the effect of the first year's amortization of Vanguard's copyright?

decrease in assets, equality, net income, increase in expenses

Which of the following shows how remitting (paying) sales tax will affect the financial statements of the company making the payment?

decrease in assets, liabilities, and operating cash flows

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

increase Stockholder's equality by $3,900

Ix Company issued 14,000 shares of $10 par value common stock at a market price of $20. As a result of this accounting event, the amount of stockholders' equity would:

increase by $280,000

Vargas Company sold a piece of land for $39,000 that had originally cost $32,500. This event would:

increase cash flows from investing activities by $39,000. not affect operating income. increase net income by $6,500.

Faust Company uses the perpetual inventory method. Faust sold goods that cost $6,600 for $11,200. If the sale was made on account, the net effect of the sale will:

increase total assets by $4,600.

The amount of accounts receivable that is actually expected to be collected is known as the:

net realizable value

What effect will the declaration and distribution of a stock dividend have on net income and cash flows?

none

Which of the following terms designates the maximum number of shares of stock that a corporation may issue?

number of shares authorized

A reason often given for a corporate stock split is to:

reduce the market price of the stock

The reason bonds are sometimes issued at a discount is:

the stated rate of interest is lower than the rate being paid on investments in the securities market with comparable risk.

Regardless of the specific type of long-term debt, which of the following is normally required with debt transactions?

to repay the interest and repay the debt

Which of the following is a disadvantage of a sole proprietorship?

unlimited liability

The most favorable audit opinion that a company can receive is a(n):

unqualified opinion