Practice Exam

A credit sale of $700 is made on July 15, terms 2/10, net/30, on which a return of $50 is granted on July 18. What amount is received as payment in full on July 24? a.) $700 b.) $637 c.) $650 d.) $686

b.) $637 ($700 - $50) × .98 = $637

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.) $9,000 b.) $8,820 c.) $8,100 d.) $8,280

b.) $8820 $9,000 × .98 = $8,820

Masterfalls Corporation purchased a one-year insurance policy in January 2013 for $30,000. The insurance policy is in effect from March 2013 through February 2014. If the company neglects to make the proper year-end adjustment for the expired insurance: A.) net income and assets will be understated by $25,000 B.) net income and assets will be overstated by $25,000 c.)net income and assets will be understated by $5,000 d.) net income and assets will be overstated by $5,000

b.) net income and assets will be overstated by $25,000 $30,000 × 10/12 = $25,000

A company purchased office supplies costing $3,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $900 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be: a.) debit Supplies, $900; credit Supplies Expense, $900. b.) debit Supplies Expense, $3,900; credit Supplies, $3,900. c.) debit Supplies Expense, $2,100; credit Supplies, $2,100. d.)debit Supplies, $2,100; credit Supplies Expense, $2,100.

c.) debit supplies Expense, $2100; credit Supplies, $2,100. $3,000 - $900 = $2,100

in a service type business, revenue is recognized: a.) when cash is received b.) at the end of the year c.) when the service is performed d.) at the end of the month

c.) when the service is performed

At December 31, 2014, before any year-end adjustments, Janus Company's Prepaid Insurance account had a balance of $2,800. It was determined that $1,200 of the Prepaid Insurance had expired. The adjusted balance for Prepaid Insurance for the year would be: a.) $3,800. b.) $2,800. c.) $1,200. d.) $1,600.

d.) $1,600 $2,800 - $1,200 = $1,600

A gift shop signs a three-month note payable to help finance increases in inventory for the Christmas shopping season. The note is signed on November 1 in the amount of $30,000 with annual interest of 6%. What is the adjusting entry to be made on December 31 for the interest expense accrued to that date, if no entries have been made previously for the interest? a.) Interest Expense 450 Interest Payable 450 b.) Interest Expense 300 Cash 300 c.) Interest Expense 450 Note Payable 450 d.) Interest Expense 300 Interest Payable 300

d.) debit interest expense, credit interest payable $30,000 × .06 × 2/12 = $300