Accounting 2110

Candy Claws Company gathered the following reconciling information in preparing its August bank reconciliation: Cash balance per books, 8/31 $19,500 Deposits in transit 900 Notes receivable and interest collected by bank 4,800 Bank charge for check printing 120 Outstanding checks 12,000 NSF check 1,020 The adjusted cash balance per books on August 31 is

23160

The following data is available for Blaine Corporation at December 31, 2021: Common stock, par $10 (authorized 30,000 shares) $250,000 Treasury Stock (at cost $15 per share) 900 Based on the data, how many shares of common stock have been issued?

25,000

McIntyre Company made a purchase of merchandise on credit from Marvin Company on August 8, for $9,000, terms 3/10, n/30. On August 17, McIntyre makes the appropriate payment to Marvin. The entry on August 17 for McIntyre Company is:

Accounts Payable 9000 Inventory 270 Cash 8730

When an account becomes uncollectible and must be written off,

Accounts Receivable should be credited.

Which of the following is in accordance with generally accepted accounting principles?

Accrual-basis accounting

Under the allowance method, writing off an uncollectible account

affects only balance sheet accounts.

A post-closing trial balance is prepared

after closing entries have been journalized and posted.

Depreciation is the process of

allocating the cost of an asset to expense over its useful life in a rational and systematic manner.

Adjusting entries are required

because some costs expire with the passage of time and have not yet been journalized.

A system of internal control

can be rendered ineffective by employee collusion.

Liabilities of a company would not include

cash

The net amount expected to be received in cash from receivables is termed the

cash realizable value.

From an internal control standpoint, the asset most susceptible to improper diversion and use is

cash.

The historical cost principle requires that when assets are acquired, they are recorded at

cost.

Sales taxes collected by a retailer are recorded by

crediting Sales Taxes Payable.

If an adjusting entry is not made for an accrued expense,

liabilities will be understated.

If no-par stock is issued without a stated value, then

the entire proceeds are considered to be legal capital.

A company purchased land for $90,000 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. Under the historical cost principle, the cost of land would be recorded at

$102,000.

On October 1, 2021, Holt Company places a new asset into service. The cost of the asset is $120,000 with an estimated 5-year life and $30,000 salvage value at the end of its useful life. What is the book value of the plant asset on the December 31, 2021, balance sheet assuming that Holt Company uses the double-declining-balance method of depreciation?

$108,000

On July 1, 2021, Hale Kennels sells equipment for $220,000. The equipment originally cost $600,000, had an estimated 5-year life and an expected salvage value of $100,000. The Accumulated Depreciation account had a balance of $350,000 on January 1, 2021, using the straight-line method. The gain or loss on disposal is

$20,000 gain.

If total liabilities increased by $30,000 and stockholders' equity increased by $20,000 during a period of time, then total assets must change by what amount and direction during that same period?

$205,000.

Fat Possum's Service Shop started the year with total assets of $330,000 and total liabilities of $240,000. During the year, the business recorded $630,000 in revenues, $420,000 in expenses, and paid dividends of $60,000.

$240,000.

Misra Company compiled the following financial information as of December 31, 2022: Revenues $340,000 Retained earnings (1/1/22) 60,000 Equipment 80,000 Expenses 250,000 Cash 90,000 Dividends 20,000 Supplies 10,000 Accounts payable 40,000 Accounts receivable 70,000 Common stock 80,000

$250,000.

On November 1, Gentle Company received a $3,000, 6%, three-month note receivable. The cash to be received by Gentle Company when the note becomes due is:

$3,045.

A credit sale of $4,000 is made on April 25, terms 2/10, n/30, on which a return of $250 is granted on April 28. What amount is received as payment in full on May 4?

$3,675

The income statement for the month of June, 2021 of Camera Obscura Enterprises contains the following information: Revenues $7,000 Expenses: Salries and Wages Expense $3,000 Rent Expense 1,500 Advertising Expense 800 Supplies Expense 300 Insurance Expense 100 Total expenses 5,700 Net income $1,300 At June 1, 2021, Camera Obscura reported retained earnings of $35,000. The company had no dividends during June. At June 30, 2021, the company will report retained earnings of

$36,300.

If the month-end bank statement shows a balance of $54,000, outstanding checks are $15,000, a deposit of $6,000 was in transit at month end, and a check for $900 was erroneously charged by the bank against the account, the correct balance in the bank account at month end is

$45,900.

Equipment was purchased for $300,000. Freight charges amounted to $14,000 and there was a cost of $40,000 to build a foundation and install the equipment. It is estimated that the equipment will have a $60,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be

$58,800.

Powell's Courier Service recorded a loss of $9,000 when it sold a van that originally cost $84,000 for $15,000. Accumulated depreciation on the van must have been

$60,000.

Chik Chik Company showed the following balances at the end of its first year: Cash $ 6,000 Prepaid insurance 9,400 Accounts receivable 7,000 Accounts payable 5,600 Notes payable 8,400 Common stock 2,800 Dividends 1,400 Revenues 44,000 Expenses 35,000 What did Chik Chik Company show as total credits on its trial balance?

$60,800

Wesley Hospital installs a new parking lot. The paving cost $40,000 and the lights to illuminate the new parking area cost $25,000. Which of the following statements is true with respect to these additions?

$65,000 should be debited to Land Improvements.

The interest charged on a $400,000, 90-day note payable, at the rate of 8%, would be

$8,000.

Glenn 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 Glenn Company pays within the discount period?

$8,820

The interest on a $10,000, 8%, 1-year note receivable is

$800.

Arquette Company's financial information is presented below. Sales Revenue $ ? Cost of Goods Sold 540,000 Sales Returns and Allowances 40,000 Gross Profit ? Net Sales 900,000 The missing amounts above for Sales Revenue and Gross Profit are:

$940,000 and $360,000

A $1,000 face value bond with a quoted price of 98 is selling for

$980.

On January 1, 2021, Morris Enterprises issued 9%, 5-year bonds with a face amount of $900,000 at par. Interest is payable annually on January 1. Instructions The journal entry for the first annual interest accrual on December 31. Would include a debit to interest expense for

81000

An accountant has debited an asset account for $1,300 and credited a liability account for $500. Which of the following would be an incorrect way to complete the recording of the transaction

Debit a Stockholders' account for $800.

A credit is not the normal balance for which account listed below?

Dividends account

Each of the following accounts is closed to Income Summary except

Dividends.

The effect of the declaration of a cash dividend by the board of directors is to

Increase Liabilities Decrease Stockholder Equity

In a perpetual inventory system, the amount of the discount allowed for paying for merchandise purchased within the discount period is credited to

Inventory.

The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit

Inventory.

Under the perpetual system, freight costs incurred by the buyer for the transporting of goods is recorded in

Inventory.

The Northern Corporation issues 7,000 shares of $100 par value preferred stock for cash at $120 per share. The entry to record the transaction will consist of a debit to Cash for $840,000 and a credit or credits to

Preferred Stock for $700,000 and Paid-in Capital in Excess of Par—Preferred Stock for $140,000.

Which of the following accounts has a normal credit balance?

Sales Revenue

Jim's Pharmacy has collected $600 in sales taxes during March. If sales taxes must be remitted to the state government monthly, what entry will Jim's Pharmacy make to show the March remittance?

Sales Taxes Payable............................................... 600 Cash............................................................. 600

On January 14, Edamame Industries purchased supplies with a cost of $700 on account. The entry to record the purchase will include

a debit to Supplies and a credit to Accounts Payable.

Unearned revenue is classified as

a liability account.

Depreciation is the process of allocating the cost of a plant asset over its service life in

a systematic and rational manner.

An account consists of

a title, a debit side, and a credit side

A T-account is

a way of depicting the basic form of an account.

Expenses incurred but not yet paid or recorded are called

accrued expenses

Interest expense on an interest-bearing note is

accrued over the life of the note.

The balance in the Accumulated Depreciation account represents the

amount charged to expense since the acquisition of the plant asset.

A debit to an asset account indicates

an increase in the asset.

The first step in the recording process is to

analyze each transaction for its effect on the accounts.

The contractual interest rate is always stated as a(n)

annual rate.

The four subdivisions for plant assets are

land, land improvements, buildings, and equipment.

When the allowance method is used to account for uncollectible accounts, Bad Debt Expense is debited when

management estimates the amount of uncollectible accounts.

Financial accounting provides economic and financial information for all of the following external users except

managers.

A corporation has the following account balances: Common Stock, $1 par value, $60,000; Paid-in Capital in Excess of Par, $1,300,000. Based on this information, the

number of shares issued are 60,000.

Prepaid expenses are

paid and recorded in an asset account before they are used or consumed.

The accounting process involves all of the following except

recording non-quantifiable economic events.

Carothers Company assembled the following information in completing its March bank reconciliation: balance per bank $7,640; outstanding checks $1,550; deposits in transit $2,500; NSF check $160; bank service charge $50; cash balance per books $8,800. As a result of this reconciliation, Carothers will

reduce its Cash account by $210.

An accounts payable clerk also has access to the approved supplier master file for purchases. The control principle of

segregation of duties is violated.

Closing entries are necessary for

temporary accounts only.

After closing entries are posted, the balance in the Retained Earnings account in the ledger will be equal to

the amount of the retained earnings reported on the balance sheet.

The left side of an account is

the debit side.

If a company determines cost of goods sold each time a sale occurs, it

uses a perpetual inventory system.

The revenue recognition principle dictates that revenue should be recognized in the accounting records

when the performance obligation is satisfied.

A company that receives an interest-bearing note receivable will

debit Notes Receivable for the face value of the note.

An aging of a company's accounts receivable indicates that $14,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,100 credit balance, the adjustment to record bad debts for the period will require a

debit to Bad Debt Expense for $12,900.

On October 1, 2021, Pennington Company issued a $90,000, 10%, 9-month interest-bearing note. If the Pennington Company is preparing financial statements at December 31, 2021, the adjusting entry for accrued interest will include a:

debit to Interest Expense of $2,250

In preparing closing entries

each expense account will be credited.

Adjusting entries are required

every time financial statements are prepared.

If a company fails to record estimated bad debt expense

expenses are understated.

The entry to record the issuance of an interest-bearing note credits Notes Payable for the note's

face value

If stock is issued for a noncash asset, the asset should be recorded on the books of the corporation at

fair value

The common characteristic possessed by all assets is

future economic benefit

Unearned Rent Revenue is

generally reported as a current liability.

Sales revenue less cost of goods sold is called

gross profit

The starting point of the accounting process is

identifying economic events.

Closing entries are made

in order to transfer net income (or loss) and dividends to the retained earnings account.

Having one person responsible for the related activities of ordering merchandise, receiving goods, and paying for them

increases the potential for errors and fraud.

The Income Summary account

is a temporary account.

Closing entries are

journalized in the general journal.

If Keene Company issues 9,000 shares of $5 par value common stock for $160,000, the accoun

Common Stock will be credited for $45,000.

A factor which distinguishes the corporate form of organization from a sole proprietorship or partnership is that a

corporation is subject to more federal and state government regulations.

The income statement for the month of June, 2021 of Camera Obscura Enterprises contains the following information: Revenues $7,000 Expenses: Salaries and Wages Expense $3,000 Rent Expense 1,500 Advertising Expense 800 Supplies Expense 300 Insurance Expense 100 Total expenses 5,700 Net income $1,300 The entry to close the expense accounts includes a

credit to Rent Expense for $1,500

At March 1, 2022, Minutemen Corp. had supplies on hand of $500. During the month, Minutemen purchased supplies of $1,200 and used supplies of $1,500. The March 31 adjusting journal entry should include a

credit to the Supplies account for $1,50

A list of accounts and their balances at a given time is called a(n

trial balance.