Accounting quizzes

Jordan company borrowed $4000 cash on August 1, 2018. The loan had a one-year term and a 6 percent annual rate. What is the amount of interest expense that must be recognized on December 31, 2018 income statement?

$100

Royal Company purchased a dump truck at the beginning of 2012 at a cost of $60000. The truck had an estimated life of 6 years and estimated residual value of $24000. On January 1, 2014, the company made major repairs of $20000 to the truck that extended the life 1 year. Thus, starting with 2014, the truck has a remaining life of 5 years and a new salvage value of $8000. Royal uses the straight-line depreciation method. What amount should be recorded as depreciation expense each year starting in 2014?

$12,000

Asago. Co. sold $18000 of merchandise to Health Co. on account, with terms 2/15, net 45. The cost of merchandise sold was $15500. Health Co. returned $1750 for merchandise that originally costs $1400. Asago credited this return to Health Co's account, which Health Co. paid in full within the discount period. What is the amount of net sales from the above transaction?

$15,925

Waxman company purchased a patent for $170000 at the beginning of 2018, and estimated that its expected useful life was 10 year. The patent had a legal life of 17 years. What amount should be recorded as amortization expense for the patent in 2018?

$17000

How much of Goldman report as Costs of Goods Purchased on the 2018 income statement?

$184600

Cerrando company has assets of $350,000, liabilities of $130,000, and retained earnings of $180,000. How much is the total owners equity?

$220,000

If a company purchases $3000 worth of inventory with terms of 1/15, n30 and pays within 15 days, then the amount paid to the seller would be

$2970

Ship land company reported assets of $1,600 and stockholders equity of $1,250. What amount will shiplab report for liabilities?

$350

On January 1, 2019, the Enid company had beginning balances as follows: total assets of $9500, total liabilities of $1500, and common stock of $2500. During 2019, Enid paid dividends to its stockholders of $1300. Given the retained earnings amounted to $8000 at the end of 2019, what was Enid's net income for 2019?

$3800

During the accounting period revenue amounted to $7400. Cash collections of accounts receivable amounted to $2300. Expenses for the period were $3000. The company paid dividends of $800. What was net income for the period?

$4400

If a company issues $5 par value common stock

$5 per share is presented in the common stock account on the balance sheet

Deacon company purchased equipment last year for $30,000. The equipment has an estimated useful life of five years. What amount will appear on the income statement for deprecation expense for the month of March, 2019?

$500

If Mussel Company has working capital of $540,000 and a current ratio of 3 to 1, the amount of current assets is:

$810,000

Retained earnings at the beginning and ending account period were $500 and $1000, respectively. Expenses of $350 and dividends paid to stockholders of $50 were reported during the period. What was the amount of revenues reported for the period?

$900

Martin uses the perpetual inventory system and FIFO cost flow method. DUring the year, Martin purchased 400 units of inventory that cost $12 each and then purchased an additional 600 units that cost $16 each. If Martin sells 700 units of inventory, what is the amount of cost of goods sold?

$9600

Which of the following would NOT describe the effects of an asset source transaction on the accounting equation?

+- asset, NA, NA, NA

If Crab Shack Company has a current ratio of 2.5 and current assets of $195,000, the amount of working capital is:

195,000/2.5= 78,000, 195,000-78,000= $117,000

Tandem company borrows $32,000 of cash from local bank. Which of following accurately reflects how it affects the accounting equation?

32,000 assets, 32,000 liabilities

Carrington recorded $97,000 in salary expense for January, 2019. Its beginning balance in salaries payable was $3,000 and its ending balance was $4,000. How much was paid in cash for salaries in January, 2019?

97,000+3,000=100,000-4,000= $96000

Which of the following is not included in cash?

A bank certificate of deposits for one year

Which of the following statements is false?

A cost of goods sold account is updated after each sale of merchandise under the periodic inventory system.

When revenue is recorded in the period it is earned and expenses are recorded when they are incurred, what basis of accounting are we using?

Accrual basis

Vegas finance company reported the following: Common stock, $10 par, 100,000 shares authorized, 80,000 shares issued and outstanding. What is the effect of issuing 1,000 shares of common stock at $15 per share.

Additional Paid-in Capital increases $5,000

Which one of the following is not a primary role of an independent auditor?

Advice clients on tax strategies.

Which of the financial statements are required by the GAAP?

All of these financial statements are required by GAAP

Paying employees salaries is an example of which type of transaction?

Asset use

A company issues common stock for cash. What is the effect on the company's accounting equation?

Assets and stockholders' equity increase

What happens to the accounting equation when the adjustment for depreciation expense for the accounting period is recorded?

Assets decrease and stockholders equity decreases

Carl and stefanie each invest $15000 in a business and are given shares of stock in Thibeau industries as evidence of their ownership interests. For this transaction, identity the effects on the accounting equation.

Assets increase and stockholders equity increases

Services are provided for customers who pay for the services immediately. For this transaction, identify the effects on the accounting equation.

Assets increase and stockholders equity increases.

The balance in the cash account is reported on which financial statement?

Balance sheet

Among the assets listed below, which one is considered the most liquid?

Cash

When a business provides cash for services, which elements of the accounting equitation are affected?

Cash and revenue

Which of the following is an example of an expense?

Cash paid for use of water and electricity

Which of the following is not an operating activity?

Cash payments for dividends to stockholders.

Which of the following is NOT an audit opinion that a company can receive on its financial statements?

Clean opinion

Valor company issues 5,000 shares of $1 per common stock for $30 per share, providing the company with $150,000 in cash. What effect, in addition to the increase in cash, does the transaction have on the accounting equation for Valor?

Common stock increase $5,000; Additional Paid-in Capital - Common increase $145,000

Which of the following statements is true regarding vertical analysis?

Common-sized financial statements can be used to compare businesses of different sizes

Which of the following statements regarding contingencies is true?

Contingencies that are probable and not estimable are disclosed in the notes to the financial statements.

Sales Discounts is classified as what type of account?

Contra-revenue

The statements of changes in stockholders equity presents an explanation of the changes in the beginning and ending balance of what two stockholders equity accounts?

Contributed capital stock and retained earnings

WHich one of the following accounts will most likely appear on the income statement of a merchandising company, but not on the income statement of a service company?

Cost of Goods Sold

Which of the following terms describes "Costs of Goods Available for Sale"?

Costs of Goods Available for Sale is allocated into cost of goods on hand and the cost of goods sold at the end of the fiscal year.

Which balance sheet accounts are most affected by operating activities?

Current assets and current liabilities

Current ratio

Current assets/current liabilities

The current portion of long-term debt is a balance sheet item for flavor products company. How would it be most likely classified on the balance sheet?

Current liability

A net loss occurs when

Expenses are greater than revenues

Which inventory method assigns the most recent costs to ending inventory?

FIFO

In which section of a statement of cash flows would the repayment of a note (borrowed funds) be reported?

Financial activities

Financial accounting standards are known collectively as GAAP. What does that acronym stand for?

Generally accepted accounting principles

Accumulated Depreciation

Increases when the monthly adjustments for depreciation is recognized

The purchase of office equipment at a cost of $2,600 with an immediate down payment of $1200 and agreement to pay the balance within 60 days is recorded in the accounts by:

Increasing office equipment for $2600, decreasing cash for $1200, and increasing accounts payable for $1400.

On May 1, the Chris Company borrowed $30,000 from the Third Street Bank on a 1-year, 6% note. If the company its records keep on a calendar year, an adjustment is needed on December 31 to increase

Interest Payable, $1,200

Which of the following items would be added to the balance per books in a bank reconciliation?

Interest on customer note

Which of the following is not an element of the fraud triangle?

Internal controls

Which inventory costing method will produce an amount for cost of goods sold that is closest to current market value?

LIFO

Which balance sheet accounts are most affected by investing activities?

Long-term assets

Which of the following statements is true with respect to long-term liabilities?

Long-term liabilities include bonds, other long-term liabilities and deferred income taxes

On January 2, 2013, Hannah company sold a machine for $1000 that it had used for several years. The machine cost $12000, and had accumulated depreciation of $9000 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine?

Loss of $2000

Which type of accounting information is intended to satisfy the needs of internal users of accounting information?

Managerial accounting

Which of the following accounts is classified as a long-term liability?

Notes payable, due in three years

Which action did the U.S. Congress take because of the audit failure at Enron, worldcom, and other companies?

Passed the Sarbanes-Oxley Act

Which of the following would appear on the balance sheet as a current liability?

Premium offers in cereal boxes

The income statement generally included which two elements of financial information?

Revenue and expenses

If the landlord has rent _____; then the tenant has rent ____

Revenue, expense

Which of the following is not an investing activity?

Sale of merchandise for cash.

Which of the following is not a financing activity?

Selling an investment in IBM stock for cash.

Which of the following would be reported in the cashflow from investing activities section of a statement of cash flows?

Sold land for cash

Which of the following statements concerning internal control is true?

Strong internal control provide reasonable assurance that the objectives of a company will be accomplished.

Windston Corp had $1800 of supplies on hand at January 1. During the year, supplies with a cost of $4000 were purchased. At December 31, the actual supplies on hand amount to $1300. After the adjustments are recorded and posted at December 31, determine the balances in the supplies and supplies expense accounts.

Supplies: $1300, supplies expense: $4500

Which of the following statements is correct?

The actual price of a bond represents the present value of all future cash flows related to the bond

If retained earnings decreased during the year, and no dividends were paid, which of the following statements must be true?

The company experienced a net loss for the year

Borden company incurred the following costs to acquire and prepare land for a new parking lot: purchase of land, cost to clear land, lighting for the parking lot, and landscaping for the lot. How should the company determine which costs should be recorded as Land Improvements and which costs should be recorded as Land?

The costs with an unlimited life will increase Land, and the costs with a limited useful life will increase Land Improvements.

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

The estimated life of the asset, its acquisition cost, and its estimated residual value

Liquidation is

The process of dividing up assets and allocating them to creditors and investors

Which of the following should be classified as an investing activity on the statement of cash flows?

The sale of a warehouse

Which of the following concepts is important to accrual accounting?

Time period, because accrual accounting divides earnings into time periods

Zinc company understated its ending inventory at the end of 2018. Which of the following statements reflects the effect of the error on the amounts shown on the 2018 financial statements?

Total assets and gross margin are understated

Yi company provided services to a customer for $5500 cash. Based on this information alone, which of the following statements is true?

Total assets increased and net income increased

Average cost per unit

Total cost of inventory available / Total number of units available

Which of the following items would be considered a cash equivalent if it was held at the balance sheet date?

U.S. Treasury bill purchased when there were 90 days until maturity

Wentworth company received payments from customers during 2018 of $10,000. At December 31, 2018, $1000 of the advance payments still had not been earned. After the adjustments are recorded and posted at December 31, 2018, the balances in the unearned service revenue and service revenue will be:

USR: $1000, SR: $9000

Boston Trombley company is a defendant in a lawsuit alleging damages of $3 billion. It is probable that Boston Trombley will lose the suit. The litigation is anticipated to continue for several years, but no reasonable estimate can be made at the time regarding ultimate financial responsibility. This situation is an example of:

a loss contingency that should be disclosed in the notes to Boston's financial statements

When an inventory system updates the Inventory account at the time of each sale it is known as

a perpetual system

An increase in inventory turnover indicates

a shorter span between the purchase and sale of the inventory.

All of the following are characteristics of current liabilities expect:

all three of the above are characteristics of current liabilities.

A liability for dividends is created

at the date of declaration

Bonds are a popular source of financing because

bond interest expense is deductible for tax purposes, while dividends paid on stock are not.

In order to determine inventory for its balance sheet, it is best for a company to count the inventory at the end of the accounting period for

both the periodic and perpetual inventory systems

Working Capital

current assets - current liabilities

Working capital

current assets - current liabilities

Which of the following is not classified as a long-term liability?

current portion of long-term debt

The effect of recording depreciation for the year is a

decrease in assets and a decrease in net income

Tropical Co. declared a cash dividend of $30,000. This transaction includes a

decrease to Retained Earnings of $30,000

Which of the following items would be added to the balance per bank statement in a bank reconciliation?

deposit in transit

The Retained Earnings account balance for a corporation is $10,000,000. This amount represents

earnings that have not been distributed to shareholders

The dollar change and percentage change in the accounts receivable account from 2017 to 2018 is calculated for Allison Corporation. This is an example of

horizontal analysis

Horizontal analysis is analysis

in which all individual items are presented as a percentage of a key item on a financial statement

When bonds are issued by a company, the accounting entry shows an

increase in assets and increase in liabilities

Operating assets with no physical properties are called

intangible assets

Seashell company is considered "very liquid" for the year ended December 21, 2016. This means that Seashell

is able to pay its current debts using its current assets

Land is not depreciated because:

it will provide future benefits for the company for an unlimited period of time

A company would repurchase its own stock for all of the following reasons except

it wishes to make an investment in its own stock

"Claims to economic resources" are known as

liabilities and stockholders' equity

The recognition of cost of goods sold expensed in the same period that sales revenue is recognized from the sale of merchandise is a good example of the

matching principle

Trend analysis is analysis

of dollar changes and percentages over several years

If the market value of goods in inventory falls to $26,000 below its cost, the company should

reduce the inventory account by $26,000

Which of the following below is an example of a capital expenditure?

replacing an engine in a company car

The three forms of business entities are:

sole proprietorships, partnerships, corporations

The primary purpose of the statements of cash flow is to provide information about

the cash inflows and outflows of the company

Depreciation is a process by which

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

Using different depreciation methods for book purposes versus tax purposes for the same asset is

the direct result of differing goals of financing and tax accounting

Stockholders prefer to invest in preferred stock because

the dividends are paid on preferred stock before they are paid on common stock

The LIFO inventory costing method assumes that the cost of units most recently purchased is

the first to be assigned to cost of goods sold

At the year end inventory, if goods are shipped FOB destination they should be included in the inventory count of

the seller

The process of buying and selling inventory is known as inventory

turnover