Accouting Multiple Choice Questions

A trucking company sold its fleet of trucks for $56.500. The trucks originally cost $1,481,000 and had Accumulated Depreciation of $1,284,000 recorded through the date of disposal. What gain or loss did the trucking company record when it sold the fleet of trucks?

Gain of $140,500.

Which of the following would not be recorded as an identifiable accounting transaction?

Hiring a new employee

Somerdale Corporation received an order from a customer on November 10. It manufactured the ordered items on November 15, shipped the goods on November 17, and received payment on December 2. Under the accrual basis of accounting, Somerdale should record revenue on:

Nov 10

Which of the following would not be recorded as an accounting transaction?

Ordering supplies to be delivered next month

Your company issues a 5-year bond with a face value of $10,000 and a stated interest rate of 7%. The market interest rate is 5%. The issue price of the bond is calculated as the:

present value of $10,000 to be received in 5 years plus the present value of $700 per year for 5 years.

LalaGurl, Incorporated sold leggings made from a fabric that gave many of its customers a serious rash. The customers are suing the company in a class action suit. Although the verdict is not yet in, LalaGurl's attorneys think it is probable that the case will cost the company $2 million. The company should:

record a liability and a loss for $2 million.

Slug Inc. purchases equipment for $1,200,000 paying $180,000 in cash and issuing $1,020,000 in promissory notes. When the journal entry is posted to the related accounts:

$1,200,000 will be debited and $180,000 will be credit to asset accounts; $1,020,000 will be credited to liability accounts

The following are the operational transactions related to Melody's Piano School for the month of May: - Provided $1,200 of piano lessons to students who paid in cash. - Provided $940 of piano lessons on account. - Collected $705 from students who took piano lessons during April. - Paid April's piano rental bill of $525. - Received May's piano rental bill of $575 and set it aside for payment in June. Assuming the company uses accrual basis accounting, what is net income for May?

$1,565

Purrfect Pets, Inc., uses $10,000 in cash to pay $10,000 on Accounts Payable. This would result in a:

$10,000 credit to Cash and a $10,000 debit to Accounts Payable.

Gross earnings for the pay period are $100,000. Required payroll deductions are: Social Security $6,700; Medicare $1,450; Federal Income tax $18,000 and State income tax $3,850. The journal entry to record wages paid includes a:

$100,000 debit to Salaries and Wages Expense.

MacKenzie Manufacturing purchased equipment for $160,000. In addition, shipping charges of $2,000 were incurred to obtain the equipment. The company paid $12,500 to construct a foundation and install the equipment. The equipment is estimated to have a residual value of $15,000 at the end of its 5-year useful life. Using the straight-line method, what is the amount of depreciation expense each year?

$31,900

Crystal Lodging recorded $330,000 in revenues, $247,500 in expenses, and $45,000 of dividends for the year. The company began the year with total assets of $285,000 and stockholders' equity of $130,500.

$127,500 increase

Assume Zap industries reported the following adjusted account balances at year-end 2021. 2020 AR $1,750,200. $1,400,920 ADA. (98,000) (81,700) AR, Net $1,652,200. $1,319,220 Assume the company recorded no write-offs or recoveries during 2921. What was the amount of Bad Debt Expense reported in 2021?

$16,300

On January 1, 2021, Lamar, Incorporated purchased equipment for $250,000. It has an estimated useful life of five years, and its residual value is $25,000. If it uses the double declining balance method, what is the amount of accumulated depreciation as of December 31 2022?

$160,000

Saguaro Company updates its inventory perpetually. Its beginning inventory is $70,000, goods purchased during the period cost $240,000, and the cost of goods sold for the period is $280,000. What is the amount of the ending inventory?

$30,000

MacKenzie Manufacturing purchased equipment for $160,000. In addition, shipping charges of $2,000 were incurred to obtain the equipment. The company paid $12,500 to construct a foundation and install the equipment. The equipment is estimated to have a residual value of $15.000 at the end of its 5-year useful life. Using the straight-line method, what is the amount of depreciation expense each year?

$31,900

The annual depreciation taken on a vehicle totals $4,350. The vehicle has been in service for three full years and the adjusting entries have been completed for the year. At the end of the third year, the balance in the Depreciation Expense account is $_________________ and the balance in the Accumulated Depreciation account is $_______________

$4,350; $13,050

A company issued 10-year, 7% bonds with a face value of $100,000. The company received $97,947 for the bonds. Using the straight-line method of amortization, the amount of interest expense for the first annual interest period is:

$7,205.30

Merle Industries had been selling its product for $52 per unit, but recently lowered the selling price to $31 per unit. The company's current inventory consists of 280 units purchased at $48 per unit. The market value of this inventory is currently $29 per unit. At what amount should the company's inventory be reported on the balance sheet?

$8,120

Sweetwater Company updates its inventory perpetually. The company reported a beginning inventory of $3,000. During the year, the company recorded inventory purchases of $9,000 and cost of goods sold of $10,000. What was the amount of its ending inventory?

2,000

On January 1, Portillo, Incorporated lends a corporate customer $240,000 at 6% interest. The amount of interest revenue that should be recorded for the quarter ending March 31 equals:

3,600

The classified balance sheet for a company reported current assets of $1,624,250, total liabilities of $815,540, Common Stock of $1,160,000, and Retained Earnings of $146,260. The current ratio was 2.5. What is the amount of current liabilities?

649,700

A company's balance sheet contained the following information: Common Stock $12.100 Accounts Payable $64,100 Total Assets $177.000 Retained Earnings $28,100 Notes Payable is the only other item on the balance sheet. Notes Payable must equal:

72,700

A company's financial records at the end of the year included the following amounts: Cash 70,700 Accounts Receivable 28,700 Supplies 4,700 Accounts Payable 10,700 Notes Payable 5,350 Retained Earnings, beginning of year 17,700 Common Stock 47,000 Service Revenue 48,450 Wages Expense 8,700 Advertising Expense 5,700 Rent Expense 10,700 What is the amount of total stockholders' equity that would be reported on the Balance Sheet at the end of the year?

88,050

Eugene Company has inventory it purchased for $6,000. It sells the inventory to a customer for $10,000, including installation. Installation sold separately costs $1,000 and the inventory sold separately costs $10,000. What amount of Service Revenue is recognized by Eugene for the installation once it has been completed?

909

Which of the following statements regarding gross profit percentage is not correct?

A decreasing gross profit percentage means that the company is selling products for a greater markup over its cost.

On September 1, 2022, Sky Mountain Company borrowed $200,000 on a 6%, note payable to Coast National Bank due on May 31. 2023. Given no previous adjusting entries have been recorded, Sky Mountain's adjusting entry four months later at December 31 would include a:

B) debit to Interest Expense of $4,000.

Which of the following would not be considered a contingent liability?

Cash received from advance ticket sales

Which of the following will result in the recording of goodwill?

Company A purchases Company B and pays more than the fair value of Company B's assets and liabilities.

Company A uses the double-declining depreciation method while Company B uses the straight-line method for an asset of the same cost and useful life. Other things being equal, which of the following is correct?

Company B will have higher net income in the early years, but Company A will have higher net income towards the end of the asset's useful life.

Goods available for sale equals:

Cost of Goods Sold plus ending inventory

Maxell Company uses the FIFO method to assign costs to inventory and cost of goods sold. The company uses a periodic inventory system. Consider the following information: Date Descrip # of units. cost per unit jan 1 Beg inv. 100. $5 June 2 purchase. 75 $4 Nov 5 sales 125 What amounts would be reported as the cost of goods sold and ending inventory balances for the year?

Cost of goods sold $600; Ending inventory $200

On July 1, Darin Company sold inventory costing $5,000 to Dee Company for $6,000, with terms of 3/10, n/30. Both companies use the perpetual inventory system. Dee Company pays the invoice on July 8 and takes the appropriate discount. What journal entry will be recorded by Dee Company on July 8?

Debit Accounts Payable for $6,000, credit Cash for $5,820, and credit Inventory for $180

If merchandise costing $500 is sold on account for $620, how is this transaction recorded when using a perpetual inventory system?

Debit Accounts Receivable and credit Sales Revenue for $620; debit Cost of Goods Sold and credit Inventory for $500.

Acme Manufacturing retired an issue of bonds before they matured. The bonds had been issued at their face value of S500,000, and the cash paid for the retirement amounted to $503,250. What journal entry was made to record the bond retirement?

Debit Bonds Payable for $500,000, debit Loss on Bond Retirement for $3,250, and credit Cash for $503,250

Oasis Company received $391,800 for bonds having a total face value of $400,000. What journal entry would be made to record this bond issuance?

Debit Cash for $391,800, debit Discount on Bonds Payable for $8,200, and credit Bonds Payable for $400,000

A company purchased office equipment for $24,500 and paid $1,470 in sales tax, $550 for installation, $3,200 for a needed adjustment to the equipment, and $2,600 for supplies that will be used for periodic routine maintenance. How should the company record this transaction?

Debit Equipment for $29,720, debit Supplies for $2,600, and credit Cash for $32,320.

What is the effect of the adjusting entry for depreciation on the accounting records?

Decrease assets; No effect on liabilities; Decrease net income

Angela is a tenant of Bruce. On July 1, Angela paid Bruce $3,600 for 3 months of rent. On July 31, Bruce's adjusting entries will include a debit to:

Deferred Revenue for $1.200 and a credit to Rent Revenue for $1,200

Which of the following items appear on more than one financial statement?

Ending Cash and ending Retained Earnings

Which of the following statements about the recording of interest on notes receivable is correct?

Interest on notes receivable is recognized when it is earned, which is not necessarily when the interest is received in cash.

Sales revenue equals $367,810, sales returns and allowances are $10,000, and sales discounts total $14,180. The cost of goods sold is $216,490, operating expenses are $28,500, and the company incurs $31,640 of income tax expense. Which of the following statements is correct?

Net sales equal $343,630 and gross profit is $127,140.

Angela is a tenant of Bruce. On March.I, Angela paid Bruce $2.400 for 3 months of rent. On March 31, Angela's adjusting entries will include a debit to:

Rent Expense for $800 and a credit to Prepaid Rent for $800.

Investors are often interested in the amount of net income distributed as dividends. In which section of the financial statements would investors look to find this amount?

Statement of retained earnings.

Power Enterprises uses accrual basis accounting. During October, the company recorded sales revenue of $150,000 from sales of goods to customers who promised to pay in November. During November, the company received payment from these customers of $135,000. No other transactions with customers took place during these two months. Which of the following statements is correct?

The Accounts Receivable account has a balance of $15,000 at November 30

Your company sells $150,000 of bonds for an issue price of $156,000. Which of the following statements is correct?

The bond sold at a price of 104.00, implying a premium of $6,000.

Legacy, Incorporated's receivables turnover ratio increased from 11.8 last year to 14.1 this year. Which of the following statements is correct?

This could be an indication that the company is using more efficient collection methods.

Which of the following items is reported on the income statement as an expense?

This month's utility bill

The Noble Corporation installs $75,000 of equipment, paying $25,000 cash and promising to pay the remaining $50,000 in 6 months. What is the impact to this transaction on the accounting equation?

Total assets are increased by $50,000

If an apartment leasing company receives the rent for January 2022 from a tenant in December 2021, this will be reported by the leasing company as:

a liability in 2021

A decreasing inventory turnover ratio indicates:

a longer time span between the purchase and sale of inventory

If the market rate of interest is 6%, a $10,000, 10-year bond with a stated annual interest rate of 8% would be issued at an amount:

greater than face value.

Charlie Company buys its inventory from Tilly, Incorporated and owes $800,000 to Tilly, Incorporated. Which account would Charlie Company use to report the amount owed?

accounts Payable

Accounting systems:

analyze, record, and summarize the activities affecting its financial condition and performance.

On July 31, 2022, a company purchased a two-year insurance policy for $27,000, paying cash and debiting Prepaid Insurance for the entire two-vear premium amount. If no adjustments have been recorded yet, the adjusting entry on December 31, 2022 includes a:

credit to Prepaid Insurance $5,625.

On December 1, 2022, Shamrock Company received $7,200 from Destiny, Incorporated for rent of an office owned by Shamrock Company. The payment covers the period from December 1, 2022 through February 28, 2023. Shamrock Company recorded this as Deferred Rent Revenue when it was received on December 1. The adjusting entry on December 31 would include a:

credit to Rent Revenue of $2,400.

Redmont Company's gross salaries and wages are $30,000, and it withholds $4.500 for income taxes and $2,000 for FICA taxes, the journal entry to record the employees' pay should include a:

credit to Salaries and Wages Payable for $23,500.

Your company pays $620,000 for a patent that has 10 years remaining. Each year, your company should:

debit Amortization Expense for $62,000 and credit Accumulated Amortization for $62,000

Bakersfield Corporation pays income tax at an average rate of 30 percent. This year its revenue is $145,000 and its expenses are $101,500. The adjusting entry to record the income tax expense will:

decrease net income by $13,050

The WC Company borrowed $26,500 from a bank during the year. This borrowing would be reported on the statement of cash flows as a(n):

financing activity in the amount of $26,500.

Deferred Revenue is a liability because:

goods or services have been paid for, but not yet provided to the customer.

Candy Cane's ice cream shop, which opened in June, is a local hit. In July, Candy Cane hired a new employee at a rate of $1,200 per month to start work at the beginning of August. In July, Candy Cane should record:

nothing, because an exchange of promises is not a transaction.

Bald Eagle Company has recorded all the year-end adjustments. Its revenue accounts total $275,500 and its expense accounts total $188,500. The closing entry to close the income statement accounts for the year will debit the various:

revenue accounts for a total of $275,500, credit the various expense accounts for a total of $188,500, and credit Retained Earnings for $87,000

The annual interest payment on bonds:

stays constant over the life of the bonds, regardless of whether bonds are issued at par, a discount, or a premium.

At the end of last year, the company's assets totaled $860,000 and its liabilities totaled $740,000. During the current year, the company's total assets increased by $58,000 and its total liabilities increased by $24,000. At the end of the current year,

stockholders' equity was $154,000.