ACC FINAL
What is the effect on total assets and stockholders' equity of paying the electric bill as soon as it is received each month? Total assets Stockholders' equity A. Decrease Decrease B. No effect No effect C. Decrease No effect D. No effect Decrease
A.
Solar Company has a one month accounting period: On March 31, an adjusting entry was made to record salary expense for employee salaries that have been earned in March but which will not be paid until the first week in April. Which of the following statements best describes the effect of this adjusting entry upon the major elements of the accounting equation? A. Assets are not affected, liabilities are increased, and stockholders' equity is increased. B. Assets are decreased, liabilities are increased, and stockholders' equity is decreased. C. Assets are not affected, liabilities are increased, and stockholders' equity is decreased. D. Assets are decreased, liabilities are not affected, and stockholders' equity is decreased.
C.
Which of the following amounts is shown net of tax on the income statement? A. Gain on Sale of Land B. Dividends C. Extraordinary Loss D. Loss on Litigation E. C. and D.
C.
Haylee Co. failed to make an end-of-period adjusting entry to record depreciation of equipment. How does this error affect Haylee's financial statements? a. Net income is understated and assets are overstated. b. Net income is understated and assets are understated. c. Net income is overstated and assets are understated. d. Net income is overstated and assets are overstated.
D.
Willard Company uses the allowance method and in 2017 it wrote off Mr. Don Wan's $5,000 account because it was deemed uncollectible. However, two years later a $5,000 check was received from Mr. Wan to settle the account. When the cash is received, which of the following journal entries should be made before recording the debit to Cash? A. Allowance for Uncollectible Accounts 5,000 Uncollectible Account Expense 5,000 B. Unearned Revenue 5,000 Miscellaneous Revenue 5,000 C. Uncollectible Account Expense 5,000 Accounts Receivable 5,000 D. Accounts Receivable 5,000 Allowance for Uncollectible Accounts 5,000
D.
In essence, when does the cost of inventory become an expense? When it is sold to a customer. When it is purchased from the supplier. When payment is made to the supplier. When collection is made from the customer.
A
Use the following information for the next four questions. On January 1, 2017, Wendy Co. issued $200,000, 5-year, 6% bonds at 92.5 when the market rate was 8%. Interest payment dates are January 1 and July 1. 82. How much Interest Expense will Alpha record on July 1, 2017? a. $7,400 b. $6,000 c. $8,000 d. $5,550 e. $12,000
A
Failure to accrue interest at the end of the period on a note payable results in a. An overstatement of net income and an understatement of liabilities. b. An understatement of net income and an overstatement of liabilities. c. An understatement of net income and an understatement of liabilities. d. None of the above.
A.
A bond with a face value $10,000 has a current price quote of 102.875. What is its price in dollars and cents? a. $10,287.50 b. $10,200.88 c. $10,028.75 d. $10,002.88
A.
A machine costing $8,800 was purchased by Heather Co. on January 1, 2015 and has been depreciated using the straight-line method assuming an 8-year life and an $800 salvage value. Heather sold the machine on January 1, 2017 for $7,500. What gain or loss should Heather record on the sale? a. Gain, $700 b. Loss, $900 c. Loss, $1,300 d. Gain, $1,500
A.
All of the following accounts generally are classified as current assets except A. Furniture C. Office Supplies B. Accounts Receivable D. Cash
A.
All of the following statements pertaining to the allowance for uncollectible accounts are true, except one. Which of the statements is false? A. The allowance is closed to Retained Earnings at the end of the period. B. The allowance could have either a debit balance or a credit balance before making the end-of-period adjusting entry to true-up the allowance account. C. The allowance decreases when an account receivable is written off as uncollectible. D. The allowance is used on the balance sheet to report accounts receivable at their net realizable value.
A.
Amortizing the discount on bonds payable a. Increases the carrying value of the bond liability. b. Decreases the amount of interest expense. c. Increases the semiannual cash payment for interest. d. Is necessary only if the bonds were issued at more than face value.
A.
An error caused the December 31, 2016 ending inventory to be understated by $40,000. What effect will this error have on the assets, liabilities, and stockholders' equity at December 31, 2016 and on net income for 2017? Assets Liabilities, Stockholders' equity 2016 Net income A. Understate No effect Understate Overstate B. Understate Understate Understate Understate C. No effect Understate No effect No effect D. No effect Understate Overstate Overstate
A.
An owner investment of cash into the business will A. Increase total assets B. Decrease total liabilities C. Decrease stockholders' equity D. Have no effect on total assets
A.
Assume the same facts as in the previous problem. Aladdin's adjusting entry at the end of February should include a debit to Rent Expense in the amount of A. $100 B. $200 C. $400 D. $500
A.
Equipment having a book value of $15,000 and an original cost of $20,000 is sold by Abbe Co. for $13,000. Abbe's journal entry to record the sale should include a a. debit to Accumulated Depreciation for $5,000. b. credit to Equipment for $15,000. c. debit to Loss on Sale of Equipment for $7,000. d. credit to Cash for $13,000.
A.
Hannah Company acquired a machine for $24,000 and has recorded depreciation for three years using the straight-line method and assuming a six-year life and zero residual value. During the fourth year of use, Hannah revised the estimated life to a total of eight years. Accordingly, how much depreciation should Hannah record in each of the asset's last five years? a. $2,400 c. $4,000 b. $3,000 d. Some other amount
A.
In a period of rising prices, Gross margin under FIFO will be higher than under LIFO. LIFO inventory will be greater than FIFO inventory. Cost of goods sold under LIFO will be less than under FIFO. Net income under LIFO will be higher than under FIFO.
A.
On April 1, 2017, Metro Insurance Company sold a one-year insurance policy to a customer covering the period 4/1/16-4/1/17. The amount of the policy was $960 and was paid in full by the customer on April 1, 2017. Metro made the following journal entry to record the sale: Cash 960 Unearned Revenue 960 Although nine months have passed, no adjusting entries pertaining to this policy have been recorded by Metro because Metro prepares annual financial statements rather than monthly statements. Based on these facts, the adjusting entry needed by Metro at the end of 2017 is A. Unearned Revenue 720 Insurance Revenue 720 B. Insurance Revenue 240 Unearned Revenue 240 C. Unearned Revenue 240 Insurance Revenue 240 D. Insurance Revenue 720 Unearned Revenue 720
A.
Selected data for the Jangle Company are as follows: Current assets $50,000 Current Liabilities $25,000 Long-term assets 70,000 Long-term liabilities 35,000 Total revenues 30,000 Total expenses 20,000 Based on these facts, what is Jangle's current ratio and debt ratio? Current ratio Debt ratio A. 2 to 1 .5 to 1 B. .5 to 1 .5 to 1 C. 2 to 1 2 2 to 1 D. 1.87 to 1 5.33 to 1
A.
The Dallas Cowboys football organization sold a season ticket for $400 which covers 8 home games ($50 each). Season tickets are not refundable. How should the ticket revenue be recognized? a. Revenue should be recognized at the rate of $50 per home game played. b. All $400 should be reported as revenue when the season ticket is sold. c. No revenue should be recognized until the final game is completed. d. None of the $400 should be recognized as revenue unless the team makes the playoffs.
A.
The ending balance of retained earnings appears on A. Both the statement of retained earnings and the balance sheet B. The retained earnings statement only C. The income statement only D. The balance sheet only
A.
What is the effect on the financial statements of recording depreciation on plant assets? A. Net income, assets, and stockholders' equity are all decreased. B. Assets are decreased but net income and stockholders' equity are not affected. C. Net income and assets are decreased but stockholders' equity is not affected. D. Net income is not affected but assets and stockholders' equity are decreased.
A.
Which of the following is not a temporary retained earnings account? A. Common stock B. Salary Expense C. Service Revenue D. Dividends
A.
Which of the following transactions would increase an asset and increase stockholders' equity? A. Performing a service on account for a customer B. Collecting cash from a customer on an account receivable C. Borrowing money from a bank D. Purchasing supplies on account
A.
Woodson Co. borrowed $50,000 on November 1, 2017 issuing a 9-month, 9% note payable. How much interest should be accrued at December 31, 2017? A. $750 C. $1,000 B. $4,500 D. $3,375
A.
The next four questions are based on the following note received by Andover Company: On August 1, 2017, Andover Company sold equipment and accepted an 8-month, 7%, $6,000 note receivable. Andover's year-end is December 31. 53. How much interest does Andover Company expect to collect on the maturity date (April 1, 2018)? A. $420 C. $105 B. $280 D. Some other amount
B
Use the following information for the next four questions. On January 1, 2017, Wendy Co. issued $200,000, 5-year, 6% bonds at 92.5 when the market rate was 8%. Interest payment dates are January 1 and July 1. 84. Which of the following would be reported as Property, Plant, and Equipment on a balance sheet? a. Land held as a future plant site b. Equipment used in operations c. Machinery held for sale d. All of the above
B
A major purpose of preparing closing entries is to A. Zero out the liability accounts. B. Bring the retained earnings account up-to-date. C. Adjust the Cash account to its correct current balance. D. All of the above.
B.
An owner investment of a building, valued at $100,000 with an outstanding $85,000 mortgage, into the business will A. Increase assets by $15,000 B. Increase stockholders' equity by $15,000 C. Increase assets by $85,000 D. Increase stockholders' equity by $100,000
B.
Changes in market value generally are ignored for investments classified as A. Available-for-sale securities. C. Trading securities. B. Held-to-maturity securities. D. Both A. and B.
B.
Flo Company had the following for the first quarter of 2017: Beginning inventory, $53,500 Net purchases, $75,500, Net sales revenue, $93,700 Gross margin rate, 30%. Based on these facts, the ending inventory should be A. $65,590 B. $63,410 C. $28,110 D. $100,890
B.
How much are total liabilities if owners' equity is $38,000 and total assets are $56,000? A. $94,000 B. $18,000 C. $20,000 D. $74,000
B.
If an adjusting entry is not made to record the expired portion of a prepaid expense, net income for the period will be A. Understated B. Overstated C. Unaffected D. None of the above
B.
If assets increased by $20,000 during a given period and liabilities decreased by $4,000 during the same period, stockholders' equity must have A. Increased by $16,000 B. Increased by $24,000 C. Decreased by $24,000 D. Decreased by $16,000
B.
Mead Company uses the aging method to adjust the allowance for uncollectible accounts at the end of the period. At December 31, 2017 the balance of accounts receivable is $220,000 and the allowance for uncollectible accounts has a credit balance of $3,200 (before adjustment). An analysis of accounts receivable produced the following age groups: Not yet due $150,000 60 days past due 60,000 Over 60 days past due 10,000 $220,000 Based on past experience, Mead Company estimates that the percentage of accounts that will prove to be uncollectible within the three age groups is 2%, 8%, and 20%, respectively. Based on these facts, the adjusting entry for uncollectible accounts should be made in the amount of A. $3,200 B. $6,600 C. $9,800 D. $13,000
B.
Purchasing a building for $100,000 by paying cash of $20,000 and obtaining a mortgage for $80,000 will A. Increase both total assets and total liabilities by $100,000. B. Increase both total assets and total liabilities by $80,000. C. Decrease total assets and increase total liabilities by $20,000. D. Decrease both total assets and total liabilities by $20,000.
B.
Receiving payment from a customer on account (i.e., collection of an account receivable) will A. Increase total assets B. Have no effect on total assets C. Decrease liabilities D. Increase stockholders equity
B.
Revenue is generally considered earned by an enterprise when a. The customer places the order. b. The customer receives the goods. c. The customer makes payment. d. None of the above.
B.
Revenues are A. Increases in paid-in capital resulting from the owners putting money into the business. B. Increases in retained earnings resulting from selling products or performing services. C. Increases in liabilities resulting from borrowing money. D. All of the above.
B.
The next three questions are based on the following facts: Remmy Brandt began a small painting business (Brandt Company) in July of the current year. Brandt prepares monthly financial statements and uses the accrual basis of accounting. The following sequence pertains to the only activities of this company from July to October: July 28 Bought one gallon of paint on account for $10, with payment to the supplier due in 90 days. August 5 Did a paint job on account for Lisa Mona for $25, with payment due from Ms. Mona in 30 days. The entire gallon of paint was used up at this time. Sept. 16 Received the $25 owed by Lisa Mona. Oct. 3 Paid the $10 owed to the supplier from the July 28 transaction. 25. In which month should the cost of the gallon of paint be recorded as an expense by Brandt Company? A. July B. August C. September D. October
B.
The next three questions are based on the following facts: Remmy Brandt began a small painting business (Brandt Company) in July of the current year. Brandt prepares monthly financial statements and uses the accrual basis of accounting. The following sequence pertains to the only activities of this company from July to October: July 28 Bought one gallon of paint on account for $10, with payment to the supplier due in 90 days. August 5 Did a paint job on account for Lisa Mona for $25, with payment due from Ms. Mona in 30 days. The entire gallon of paint was used up at this time. Sept. 16 Received the $25 owed by Lisa Mona. Oct. 3 Paid the $10 owed to the supplier from the July 28 transaction. Based on the foregoing facts, in which month should Brandt Company report the $25 revenue on its income statement? A. July B. August C. September D. October
B.
Under the allowance method, the entry to record bad debt expense has what effect on the financial statements? A. Increases expenses and increases owners' equity B. Decreases owners' equity and decreases assets C. Decreases assets and has no effect on net income D. Decreases net income and increases liabilities
B.
Under the allowance method, which of the following best describes the journal entry used to write off an uncollectible account receivable? A. Dr. Uncollectible Account Expense Cr. Allowance for Uncollectible Accounts B. Dr. Allowance for Uncollectible Accounts Cr. Accounts Receivable C. Dr. Uncollectible Account Expense Cr. Unearned Revenue D. Dr. Accounts Receivable Cr. Uncollectible Account Expense
B.
Which of the following statements is false? A. A trial balance is a listing of all accounts with their current balances. B. A trial balance is the same as a balance sheet. C. A trial balance is used to check on the equality of debits and credits. D. A trial balance may be taken at any time.
B.
Which of the following would appear as an Operating Expense on the Income Statement? A. Sales Discounts B. Bad Debt Expense C. Interest Expense D. B. and C.
B.
Which one of the following items should be accounted for as a capital expenditure? a. Monthly rental cost of an office building. b. Sales taxes paid in conjunction with the purchase of equipment. c. Costs incurred to repair multiple leaks in the factory roof. d. Maintenance fees paid with funds provided by the federal government.
B.
85. Zane Co. purchased equipment costing $100,000, paid freight costs of $300 and installation of $500. Zane spent $1,000 training employess to operate the equipment and incurred repair costs of $800 during its first year of use. How much should Zane record as the cost of Equipment? a. $100,000 b. $100,800 c. $101,800 d. $102,600
C
The next four questions are based on the following note received by Andover Company: On August 1, 2017, Andover Company sold equipment and accepted an 8-month, 7%, $6,000 note receivable. Andover's year-end is December 31. . How much interest should Andover accrue on December 31, 2017? A. $210 B. $420 C. $175 D. Some other amount
C
The next two questions are based on the following facts. Acme Paper Company wants to know the effect of different inventory valuation methods on its financial statements. Given below are data concerning its inventory and purchases for the current year. Units Cost Total Jan. 1 Beginning inventory 2,000 $ 10.00 $ 20,000 April 4 Purchase 1,500 10.30 15,450 July 23 Purchase 3,400 10.75 36,550 June 9 Sale (1,000) Oct. 31 Sale (2,400) Units on hand 3,500 59. If Acme uses the FIFO method, the ending inventory will be $35,450 $35,000 $37,580 $37,625
C
Use the following information for the next four questions. On January 1, 2017, Wendy Co. issued $200,000, 5-year, 6% bonds at 92.5 when the market rate was 8%. Interest payment dates are January 1 and July 1. 81. How much cash did Alpha receive when the bonds were issued? a. $200,000 b. $92,500 c. $185,000 d. Some other amount.
C
Use the following information for the next four questions. On January 1, 2017, Wendy Co. issued $200,000, 5-year, 6% bonds at 92.5 when the market rate was 8%. Interest payment dates are January 1 and July 1. 83. What is the carrying value of the bonds on the 12/31/2017 Balance Sheet? a. $200,000 b. $185,000 c. $187,856 d. $185,887 e. None of the above.
C
The amount of dividends declared by a company to its owners is shown on the A. Balance sheet B. Income statement C. Statement of retained earnings D. Income statement and retained earnings statement
C.
All of the following statements pertaining to depreciation are true, except one. Which one of the statements is false? A. Depreciation is a process of allocating the cost of an asset over its useful life. B. A major objective of depreciation accounting is to match th e cost of an asset with the revenues it helps to generate. C. Depreciation should not be recorded in years that the market value of the asset has increased. D. Obsolescence as well as physical life should be considered when determining the period over which an asset should be depreciated.
C.
Blake Company manufactures and sells refrigerators with a 2-year warranty. Warranty costs are expected to average 7% of sales during the warranty period. The following table shows the sales and actual warranty costs incurred during the first year of operations: Year Sales Warranty costs incurred 2017 $600,000 $12,000 Based on the foregoing facts, the amount of warranty payable that should be reported on the balance sheet at 12/31/17 is A. $12,000 C. $30,000 B. $8,400 D. $42,000
C.
If the debit amount of an entry to record the purchase of supplies on account is not posted: A. Liabilities will be understated B. Expenses will be overstated C. Assets will be understated D. Stockholders' equity will be understated
C.
On January 1 of the current year, Aladdin Company paid $600 rent to cover six months (January-June). Aladdin recorded this transaction as follows: Prepaid Rent 600 Cash 600 Aladdin Company prepares adjusting entries at the end of each month. Based on these facts, the adjusting entry at the end of January should include A. A credit to Prepaid Rent for $500 B. A debit to Prepaid Rent for $500 C. A credit to Prepaid Rent for $100 D. A debit to Prepaid Rent for $100
C.
Texas Airlines sold a reduced-fare ticket to a customer on January 8 for a flight to be taken on May 15. No changes can be made and the ticket price is not refundable after 24 hours (Jan. 9). When should Texas Airlines report the ticket price as revenue? A. January 8 B. January 9 C. May 15 D. Depends on whether or not the passenger shows up for the flight.
C.
The following data were obtained from the merchandise records of Charger Company: Net sales revenue $ 620,000 Beginning inventory 70,000 Ending inventory 40,000 Net purchases 400,000 Based on these facts, the gross margin for Charger Company is $150,000 $220,000 $190,000 Some other amount
C.
The next three questions are based on the following facts: Remmy Brandt began a small painting business (Brandt Company) in July of the current year. Brandt prepares monthly financial statements and uses the accrual basis of accounting. The following sequence pertains to the only activities of this company from July to October: July 28 Bought one gallon of paint on account for $10, with payment to the supplier due in 90 days. August 5 Did a paint job on account for Lisa Mona for $25, with payment due from Ms. Mona in 30 days. The entire gallon of paint was used up at this time. Sept. 16 Received the $25 owed by Lisa Mona. Oct. 3 Paid the $10 owed to the supplier from the July 28 transaction. 26. What is the effect of the September 16 transaction on September's net income? A. Increase B. Decrease C. No effect
C.
The sum of (a) ending inventory and (b) cost of goods sold is Gross margin Net purchases Goods available for sale Beginning inventory
C.
Which of the following accounts is an income statement account? a. Unearned Revenue b. Accumulated Depreciation c. Gain on Disposal of Equipment d. Allowance for Uncollectible Accounts e.
C.
Which of the following accounts would not be included in closing entries? A. Depreciation Expense B. Taxi Fare Revenue C. Accumulated Depreciation D. Fuel Expense
C.
Which of the following would be reported as an investing activity on the Statement of Cash Flows? a. Receipt of dividends b. Purchase of Treasury Stock c. Sale of equipment d. All of the above
C.
The next four questions are based on the following note received by Andover Company: On August 1, 2017, Andover Company sold equipment and accepted an 8-month, 7%, $6,000 note receivable. Andover's year-end is December 31. . If Andover Company fails to make an adjusting entry for the accrued interest, A. Net income will be overstated and liabilities will be understated. B. Net income will be overstated and assets will be understated. C. Net income will be understated and liabilities will be overstated. D. Net income will be understated and assets will be understated.
D
The next two questions are based on the following facts. Acme Paper Company wants to know the effect of different inventory valuation methods on its financial statements. Given below are data concerning its inventory and purchases for the current year. Units Cost Total Jan. 1 Beginning inventory 2,000 $ 10.00 $ 20,000 April 4 Purchase 1,500 10.30 15,450 July 23 Purchase 3,400 10.75 36,550 June 9 Sale (1,000) Oct. 31 Sale (2,400) Units on hand 3,500 60. If Acme uses the LIFO method, cost of goods sold will be $34,420 C. $35,450 $37,580 D. $36,550
D
The primary objective of financial reporting is to provide information A. to the federal government. B. about the profitability of the enterprise. C. regarding the cash flows of the enterprise. D. that is useful for making investment and lending decisions.
D
he next four questions are based on the following note received by Andover Company: On August 1, 2017, Andover Company sold equipment and accepted an 8-month, 7%, $6,000 note receivable. Andover's year-end is December 31. 54. Which of the following accounts will be credited in the journal entry on April 1, 2018 assuming collection in full? A. Interest Receivable B. Note Receivable C. Interest Revenue D. All of the above
D
Saxton Company has a liability on its books that has been properly reported as a long term liability through December 31, 2016. It is now the end of 2017 and some of this debt becomes due in 2018. If Saxton reports the entire debt as a long-term liability in its December 31, 2017 balance sheet, the effect will be to a. Understate total liabilities. b. Overstate net income. c. Understate the current ratio. d.Overstate the acid-test ratio.
D.
Another name for the balance sheet is A. Statement of operations B. Statement of earnings C. Statement of profit and loss D. Statement of financial position
D.
First Bank made a 6-month loan to a local business. When does First Bank recognize interest revenue on this loan? a. When the loan is made b. When the interest is collected c. Only at the maturity of the note d. As time goes by
D.
If the credit amount of an entry to record the payment of an account payable was not posted: A. Liabilities will be understated. B. Expenses will be understated. C. Stockholders' equity will be overstated. D. Assets will be overstated.
D.
In its first month of operations, Florence Company made the following entries pertaining to merchandise acquired for resale:, Inventory 6,000 Accounts Payable 6,000 Accounts Receivable 7,200 Sales Revenue 7,200 Cost of Goods Sold 5,500 Inventory 5,500 Based on these facts, how much was Florence's gross profit for the month? Zero $500 $1,200 $1,700
D.
Increases in stockholders equity arise from A. Investments in the business by owners B. Earning net income C. Borrowing money D. Both A and B but not C
D.
Omitting the year-end adjusting entry to estimate warranty expense will: Overstate the current ratio. Understate net income and overstate liabilities. C. Overstate stockholders' equity and understate liabilities. D. A. and C.
D.
Performing a service on account will A. Increase total assets B. Increase stockholders' equity C. Decrease total liabilities D. Both A and B.
D.
Purchasing office equipment on account will A. Increase total assets B. Increase total liabilities C. Have no effect on stockholders' equity D. All of the above
D.
The Unearned Revenue account of Jack Company began 2017 with a normal balance of $5,700 and ended 2017 with a normal balance of $12,500. During 2017, the Unearned Revenue account was debited for $19,900 reflecting revenue that became earned in 2017. Based on these facts, how much cash was received and credited to Unearned Revenue in 2017? A. $19,900 C. $33,500 B. $44,900 D. $26,700 C. $33,500
D.
The income statement for Floyd Company shows gross profit of $144,000, operating expenses of $130,000, and cost of goods sold of $216,000. What is the amount of net sales revenue? $274,000 $230,000 $490,000 $360,000
D.
The journal entry in which Uncollectible Accounts Expense is debited and Allowance for Uncollectible Accounts is credited is A. Prepared prior to the time a particular account is actually deemed to be uncollectible. B. Needed to report receivables at their net realizable value. C. Frequently determined on the basis of a percentage of sales revenue. D. All of the above.
D.
What type of account is Discount on Bonds Payable and what is its normal balance? Type of Account Normal balance a. Contra Credit b. Adjunct Debit c. Adjunct Credit d. Contra Debit
D.
Which of the following transactions would affect the Statement of Cash Flows? a. Sale of goods on account. b. Entry to record supplies used during the period c. Accrual of interest on a note payable. d. Payment of monthly rent.
D.
Which of the following transactions would increase an asset and increase a liability? A. Payment of an account payable B. Purchasing office equipment for cash C. An owner investment of cash into the business D. Borrowing money from a bank
D.