accounting final exam

Action Signs recorded credit sales of $10,000 on the gross method. Terms are 2/20, n/30. Select the correct statement about the entry to record this sale.

Accounts receivable increase by $10,000.

Cost of goods sold is equal to

the cost of merchandise purchased plus transportation costs plus beginning inventory minus purchase returns and allowances and purchase discounts.

Depreciation is a process by which

the cost of plant and equipment is allocated to expense over the time periods that benefit from the use of the asset.

An example of a current liability that must be accrued is

wages payable

Which of the following invests funds into a business and is considered an owner?

Stockholders.

When a corporation decides to pay a cash dividend, which of the following is an important consideration?

The balances in the corporation's cash and retained earnings accounts

Georgia's Salon- During May 2023, $10,000 of the gift cards were redeemed for salon services. Which of the following is the correct journal entry to record the redemption of the gift cards?

Unearned Sales Revenue 10,000 Sales Revenue 10,000

A company forgot to record four adjustments during the current year. Which one of the following omissions of adjustments will understate assets?

Unearned revenue is not reduced for the portion that has been earned.

When will bonds sell at a discount?

When the stated rate of interest is less than the yield rate of interest at the time of issue.

HVAC Service- The journal entry to record payment for the office equipment and supplies includes a debit to

accounts payable

On the balance sheet, the cumulative amount of plant and equipment already expensed is reported in an account called

accumulated depreciation

Which pair of accounts has the same set of rules for debit and credit entries?

cash and notes payable

Which one of the following is an internal user of financial information?

company management.

If an investor can use accounting information for two different companies to evaluate the types and amounts of expenses, the information is said to have the quality of

comparability

What is the name for a person who lends funds to a business entity and expects repayment of the funds with interest?

creditor.

Which of the following accounts would not be reported in the Property, Plant, and Equipment section of a balance sheet?

depreciation expense-buildings

Assets classified as property, plant, and equipment are reported at

each asset's original cost less accumulated depreciation since acquisition.

What is the name of the branch of accounting concerned with providing external decision-makers with information to assess the amounts, timing, and uncertainties of the company's future cash flows?

financial accounting.

What is the primary objective of financial reporting?

financial reporting- all of them.

Absolute Appliances- What amount should the company recognize as interest revenue on December 31 of the current year?

$1,000

Carver Memorial Gardens purchased supplies for $14,500 during the year. On January 1, the supplies on hand were $1,000. On December 31, the supplies on hand were $3,500. Determine the amount of supplies expense for the year.

$12,000

Match Incorporated recorded a salary expense of $120,000 in the current year. However, additional salaries of $9,000 had been earned, but not paid or recorded as of December 31, the current year. After the adjustments are recorded and posted on December 31, the current year, the balances in the Salaries Expense and Salaries Payable accounts will be as follows:

$129,000 $9,000

All Star Auto has an accounts receivable balance after posting net collections from customers for 2013 of $180,000. The customers took advantage of sales discounts of $15,000. Management aged the accounts receivable and estimate for uncollected account percentages as follows:- The net realizable value of the accounts receivable is

$170,200

Absolute Appliances- What amount should the company recognize as interest revenue in next year?

$2,000

On January 2, Alfredo Corporation sold merchandise with a gross price of $100,000 to a customer with terms of 2/10, n/30. How much sales discounts would be recorded if the payment was received from the customer on January 8? Assume the company uses the gross method of recording receivables.

$2,000.

On January 1, current year, a company reported assets of $1,000,000 and liabilities of $600,000. During the year, assets decreased by $100,000 and Stockholders' Equity decreased by $200,000. What is the amount of liabilities on December 31, current year?

$200,000

Cambridge Cleaners started business on January 1, current year, and immediately purchased $5,000 of supplies to use in the business. At the end of the month, 30 percent of the supplies remained unpaid and 20% were still on hand. What amount should appear as an expense on the income statement for January?

$4,000

Benchmark Surveyors- Calculate Current Assets.

$401,0000

The total amount of interest that will be paid on a 5-year, $90,000 note payable at 11% simple annual interest is?

$49,500

Bargain Spot Fabrics- What is the retained earnings balance at the end of the current year?

$50,000

Landmark Company reported the following information in the stockholders' equity section of its December 31 balance sheet: What is the number of shares of common stock issued and outstanding? Hint: consider par value and the $600,000 for common stock.

$50,000

Aaron Corporation- Calculate net income.

$65,500

Landmark Company reported the following information in the stockholders' equity section of its December 31 balance sheet: The company's total capital stock is

$675,000.

AT&U Company- If the company estimates its bad debt to be 2% of net credit sales, what will be the balance in the Allowance for Doubtful Accounts account after the adjustment for bad debts?

$69,000

A company needs to record 6 months of accrued interest on a 4-year, 12%, $12,000 promissory note payable. How much interest expense should be accrued?

$720

Bargain Spot Fabrics- What amount should the company report on its Balance Sheet for Total Assets?

$850,000

Benchmark Surveyors- Calculate Current Liabilities.

$97,000

Which of the following will not cause a trial balance to be out of balance?

A credit entry is posted to the wrong account, but still as a credit.

A company rented office space to a tenant on January 1 and received a total of $90,000 for the first nine months of rent. The amount was recorded as Rent Collected in Advance when received. Adjustments are recorded only at the end of every quarter. What effect does the adjustment on March 31 have on the company's net income for the quarter ending March 31?

An increase by $30,000

Gainesville Truck Center- When the company journal entry is recorded for the payment of these wages and related liabilities, which of the following statements is true regarding the impact on the accounting equation?

Assets and stockholders' equity will decrease, while liabilities will increase.

During March, Honeybaked Spam purchases supplies for cash. The supplies will be used in April. What effect does this transaction have on the accounting equation at the time the supplies are purchased?

Assets increase and stockholders' equity decreases

If a company uses the allowance method to account for doubtful accounts, when will the company's stockholders' equity decrease?

At the end of the accounting period when an adjusting entry for bad debts is recorded

What is the impact on the accounting equation of recording a payment to a supplier on account?

Both assets and liabilities decrease.

Floors 4 U uses straight-line depreciation for its equipment. The company purchased equipment for $250,000 and estimated its useful life at 8 years. The bookkeeper failed to consider the residual value of $25,000. What is the impact on net income and operating income of failing to consider the residual value?

Both net income and operating income will be understated.

Georgia's Salon- Which of the following is the correct journal entry to record the sale of the gift cards?

Cash 50,000 Unearned Sales Revenue 50,000

Which of the following best describes "cost of goods available for sale"?

Cost of goods available for sale is allocated into cost of ending inventory and cost of goods sold.

Which of the following statements is true?

If all transactions are correctly posted to the general ledger, the sum of the accounts with debit balances should be equal to the sum of the accounts with credit balances.

A company forgot to record four adjustments during the current year. Which one of the following omissions of adjustments will understate net income?

Income taxes owed but not yet paid are ignored.

A company's current ratio is 2.00. If the company makes a payment on account, what is the effect on the current ratio?

Increase

Operating assets with no physical properties are called

Intangible assets

What happens to the accounting equation when the adjustment is recorded to recognize earned revenue previously recorded as unearned revenue?

Liabilities decrease and stockholders' equity increases

Absolute Appliances- What is the maturity date of the note?

March 1 of next year

Which of the following underlying assumptions for the conceptual framework is the reason the dollar is used in the preparation of financial statements?

Monetary Unit

What is the distinguishing characteristic between accounts receivable and notes receivable?

Notes receivable generally specify an interest rate and a maturity date at which any interest and principal must be repaid.

What does the phrase "Revenue is recognized when earned" mean?

Revenue is recorded in the accounting records and reported on the income statement when goods are sold and delivered to a customer.

Beard Marine- What was the economic effect of the dividend payment?

The dividend reduced total retained earnings.

On May 1, a company borrowed $30,000 from the First National Bank on a 1-year, 6% note. Assuming the company keeps its records on a calendar year, an entry is needed on December 31 to increase

interest payable by $1,200.

When a corporation pays a previously declared cash dividend, which of the following is true?

liabilities decrease

What is the classification unearned revenue on a balance sheet?

liability.

When a corporation makes a cash distribution despite having no retained earnings, this is called a

liquidating dividend.

Liquidity

liquidity- all of them.

When bonds are sold for less than the par amount, it means that the

maturity value will be less than the par amount.

After a corporation declares a cash dividend, what takes place on the date of record?

no entry is necessary.

Which of the following is not classified as a current liability account?

notes payable due in 2 years

Which of the following is a noncurrent asset?

property, plant, and equipment

Which one of the following is not one of the activities on the Statement of Cash Flows?

retained activities

Which of the following is one of the elements of stockholders' equity?

retained earnings

When a corporation declares a cash dividend, which of the following is true?

stockholders' equity decreases

Income statement accounts are also known as

temporary accounts

Which of the following sets of factors is needed to calculate depreciation on plant and equipment?

the asset's acquisition cost, its estimated life, and its estimated residual value.

Which of the following preferred stock features authorizes the corporation to redeem shares at a fixed price on or after a specified date?

the call provision

The going concern assumption is concerned with

the company's ability to continue operations long enough to carry out its existing obligations.

Common stock usually has all of the following features except

the conversion privilege