Financial Accounting

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The appropriate section in the statement of cash flows for reporting the cash payment of wages is: A) Operating activities. B) Financing activities. C) Investing activities. D) Schedule of noncash investing or financing activity. E) This is not reported on the statement of cash flows.

Pat's Pets recently paid to have the engine in its delivery van overhauled. The estimated useful life of the van was originally estimated to be 4 years. The overhaul is expected to extend the useful life of the van to 10 years. The overhaul is regarded as a(n): A) revenue expenditure. B) capital expenditure. C) equity expenditure. D) matching expenditure.

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is: A) Operating activities. B) Financing activities. C) Investing activities. D) Schedule of noncash investing or financing activity. E) This is not reported on the statement of cash flows.

When 100 shares of $1 par value Common Stock are issued at $25 per share, Paid-in Capital in Excess of Par—Common will: A) increase $100. B) increase $2,500. C) increase $2,400. D) stay the same.

When using the indirect method to calculate and report the net cash provided or used by operating activities, net income is adjusted for all but which of the following? A) Gains and losses from nonoperating items. B) Revenues and expenses that did not provide or use cash. C) Changes in noncurrent assets and noncurrent liabilities. D) Changes in current liabilities related to operating activities. E) Depreciation and amortization expense.

A company has a gross margin ratio of 40%. Cost of Goods Sold equals $360,000. Its selling, general and administrative expenses total $87,500. Its sales for the period equals A) $240,000. B) $87,500. C) $152,500. D) $360,000. E) $600,000.

E If gross is 40% then COGS is 60% 40%= (600,000-3,600,000)/(600,000) 360,000=.60 * Net Sales 360,000/.6= 600,000

At December 31 of the current year, a company reported the following: •Total sales for the current year: $980,000 includes $160,000 in cash sales •Accounts receivable balance at Dec. 31, end of current year: $160,000 •Allowance for Doubtful Accounts balance at January 1, beginning of current year: $7,300 credit •Bad debts written off during the current year: $5,800. Prepare the necessary adjusting entries to record bad debts expense assuming this company's bad debts are estimated to equal 5% of accounts receivable.

(7300-5800)= 1500 (1500)*(.05)= 75

Thatcher Company had a January 1, credit balance in its Allowance for Doubtful Accounts of $4,000 for the current year. The following transactions and events affected the Allowance for Doubtful Accounts during the current year: Apr. 15 Bean's account receivable of $2,700 was deemed uncollectible. July 1 Cho paid the full amount of a previously written-off account receivable. This receivable of $1,300 had been written off in the prior year. Dec. 31 Bad debts expense of $4,500 was recorded. What amount should appear in the allowance for doubtful accounts in the December 31, balance sheet for the current year?

4/15 Allowance 2700 A.R 2700 7/1 A.R 1300 Allowance 1300 Cash 1300 AR 1300 12/31 Bad Debt Expense 4500 Allowance 4500

A discount on bonds payable: A) Occurs when a company issues bonds with a contract rate less than the market rate. B) Occurs when a company issues bonds with a contract rate more than the market rate. C) Increases the Bond Payable account. D) Decreases the total bond interest expense. E) Is not allowed in many states to protect creditors

Amortizing a bond discount: A) Allocates a portion of the total discount to interest expense each interest period. B) Increases the market value of the Bonds Payable. C) Decreases the Bonds Payable account. D) Decreases interest expense each period. E) Increases cash flows from the bond.

An advantage of bonds is: A) Bonds do not affect owner control. B) Bonds require payment of par value at maturity. C) Bonds can decrease return on equity. D) Bond payments can be burdensome when income and cash flow are low. E) Bonds require payment of periodic interest.

Capital expenditures are not immediately expensed because these items: A) extend the useful life of a plant asset. B) return a plant asset to its prior condition. C) decrease the plant asset's capacity. D) maintain a plant asset in working condition.

If a company has advance ticket sales totaling $2,000,000 for the upcoming football season, the receipt of cash would be journalized as: A) Debit Sales, credit Unearned Revenue. B) Debit Unearned Revenue, credit Sales. C) Debit Cash, credit Unearned Revenue. D) Debit Unearned Revenue, credit Cash. E) Debit Cash, credit Ticket sales payable.

The current period's ending inventory is: A) The next period's beginning inventory. B) The current period's cost of goods sold. C) The prior period's beginning inventory. D) The current period's net purchases. E) The current period's beginning inventory.

The market value (price) of a bond is equal to: A) The present value of all future cash payments provided by a bond. B) The present value of all future interest payments provided by a bond. C) The present value of the principal for an interest-bearing bond. D) The future value of all future cash payments provided by a bond. E) The future value of all future interest payments provided by a bond.

When a bond sells at a premium A) The contract rate is above the market rate B) the contact rate is equal to the market rate C) the contract rate is below the market rate D) it means that the bond is a zero coupon bond E) the bond pays no interest

When using the indirect method to calculate and report net cash provided or used by operating activities, which of the following is subtracted from net income? A) Decrease in income taxes payable. B) Depreciation expense. C) Amortization of intangible assets. D) Bad debts expense. E) Decrease in merchandise inventory.

If the liabilities of a company increased $74,000 during a period of time and equity in the company decreased $19,000 during the same period, what was the effect on the assets? A) Assets would have increased $55,000. B) Assets would have decreased $55,000. C) Assets would have increased $19,000. D) Assets would have decreased $19,000. E) None of the choices are correct.

A Explanation: Assets = Liabilities + Equity Change in Assets = Change in Liabilities + Change in Equity Change in Assets = + $74,000 − $19,000 Change in Assets = + $55,000

) Fragment Company is a wholesaler that sells merchandise in large quantities. Its catalog indicates a list price of $300 per unit on a particular product and a 40% trade discount is offered for quantity purchases of 50 units or more. The cost of shipping the merchandise is $7 per unit under terms FOB shipping point. If a customer purchases 100 units of this product, what is the amount of sales revenue that Fragment will record from this sale? A) $18,000 B) $30,000 C) $18,700 D) $29,300 E) $30,700

A Trade discount = $300 × 40% = $120 Total sales price per unit = $300 − $120 = $180 Total sales = $180 × 100 units = $18,000

On July 1, a company paid the $2,400 premium on a one-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the first year ended December 31? A) $1,200. B) $2,400. C) $1,000. D) $400. E) $1,400.

A $2,400 * 6/12 = $1,200

A company issued 5-year, 7% bonds with a par value of $100,000. The market rate when the bonds were issued was 6.5%. The company received $102,105 cash for the bonds. Using the straight-line method, the amount of recorded interest expense for the first semiannual interest period is: A) $3,289.50. B) $3,500.00. C) $3,613,70. D) $6,633.70. E) $7,000.00.

A Cash interest paid: $100,000 × 0.07 × ½ year = $3,500 Premium amortized: ($102,105 − $100,000)/10 = $210.50 Interest expense: $3,500 − $210.50 = $3,289.50

A company has sales of $695,000 and cost of goods sold of $278,000. Its gross profit (loss) equals: A) $(417,000). B) $695,000. C) $278,000. D) $417,000. E) $973,000.

A 695,000-278,000= 417,000

Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 20,000 shares authorized, 9,000 shares issued, and 8,000 shares of common stock outstanding. The journal entry to record the dividend declaration is: A) Debit Retained Earnings $4,000; credit Common Dividends Payable $4,000. B) Debit Common Dividends Payable $4,000; credit Cash $4,000. C) Debit Retained Earnings $4,500; credit Common Dividends Payable $4,500. D) Debit Common Dividends Payable $4,500; credit Cash $4,500. E) Debit Retained Earnings $10,000; credit Common Dividends Payable $10,000.

A 8000/.50

A business uses a credit to record: A) An increase in an expense account. B) A decrease in an asset account. C) A decrease in an unearned revenue account. D) A decrease in a revenue account. E) A decrease in a common stock account.

A liability for dividends exists: A) When cumulative preferred stock is sold. B) On the date of declaration. C) On the date of record. D) On the date of payment. E) For dividends in arrears on cumulative preferred stock.

Beginning inventory plus net purchases is: A) Cost of goods sold. B) Merchandise (goods) available for sale. C) Ending inventory. D) Sales. E) Shown on the balance sheet.

Cash, not including cash equivalents, includes: A) Postage stamps. B) Customer checks, cashier checks, and money orders. C) IOUs. D) Two-year certificates of deposit. E) Money market funds.

On December 1, Victoria Company signed a 90-day, 6% note payable, with a face value of $15,000. What is the journal entry to record the issuance of the note on December 1? A) Debit Cash, $15,225; Credit Notes Payable, $15,000, Credit Interest Payable, $225. B) Debit Cash, $15,000; Credit Notes Payable, $15,000. C) Debit Cash, $15,000; Debit Interest Expense, $225; Credit Notes Payable, $15,225. D) Debit Cash, $15,000; Debit Interest Expense, $75; Credit Notes Payable, $15,075. E) Debit Cash, $15,000; Debit Interest Expense, $75; Credit Notes Payable, $15,000; Credit Interest Payable, $75

On December 15, 2015, a company receives an order from a customer for services to be performed on December 28, 2015. Due to a backlog of orders, the company does not perform the services until January 3, 2016. The customer pays for the services on January 6, 2016. The revenue principle requires the revenue to be recorded by the company on: A) December 15, 2015. B) January 3, 2016. C) December 28, 2015. D) January 6, 2016.

On June 20 of the prior year, a company determined that a customer's account receivable was uncollectible and that the account should be written off. Unexpectedly, on September 1 of the current year, the customer paid the account in full. Assuming the allowance method is used to account for bad debts, what effect will this recovery have on the company's net income and total assets? A) Decrease in net income; no effect on total assets. B) No effect on net income; no effect on total assets. C) Decrease in net income; decrease in total assets. D) Increase in net income; no effect on total assets. E) No effect on net income; decrease in total assets

On May 1, Anders Company purchased merchandise in the amount of $5,800 from Shilling, with credit terms of 2/10, n/30. Anders uses the perpetual inventory system and the gross method. The journal entry or entries that Anders will make on May 1 is: A) Sales 5,800 Accounts receivable 5,800 B) Merchandise Inventory 5,800 Accounts payable 5,800 C) Accounts payable 5,800 Sales 5,800 D) Merchandise Inventory 5,800 Cash 5,800 E) Purchases 5,800 Accounts payable 5,800

On October 12 of the current year, a company determined that a customer's account receivable was uncollectible and that the account should be written off. Assuming the allowance method is used to account for bad debts, what effect will this write-off have on the company's net income and total assets? A) Decrease in net income; no effect on total assets. B) No effect on net income; no effect on total assets. C) Decrease in net income; decrease in total assets. D) Increase in net income; no effect on total assets. E) No effect on net income; decrease in total assets.

The Discount on Bonds Payable account is: A) A liability. B) A contra liability. C) An expense. D) A contra expense. E) A contra equity.

Which cost is NOT included in the cost of Land Improvements? A) sprinkler systems for landscaping B) lights on exterior of new building C) back property taxes on land parcel D) B and C

Which of the following items is reported on the statement of cash flows under financing activities? A) Declaration of a cash dividend. B) Payment of a cash dividend. C) Declaration of a stock dividend. D) Payment of a stock dividend.

A company had the following purchases and sales during its first year of operations: Purchases Sales January: 10 units at $120 6 units February: 20 units at $125 5 units May: 15 units at $130 9 units September: 12 units at $135 8 units November: 10 units at $140 13 units On December 31, there were 26 units remaining in ending inventory. Using the Perpetual LIFO inventory valuation method, what is the cost of the ending inventory? A) $3,405. B) $3,270. C) $3,200. D) $3,364. E) $5,400.

B 4@$120= 480 15@$125= 1,875 6@$130= 780 1@$135= 135 26 units$3,270

Barbarino Corporation purchased land and a building for $800,000. An appraisal indicates that the land's market value is $400,000 and the building's market value is $600,000. When recording this transaction Barbarino should debit: A) Land for $400,000. B) Land for $320,000. C) Building for $600,000. D) Building for $500,000

B =400,000/(400,000+600,000) =40% 40% * 800,000= 320,000

Buffalo Company reported a December 31 ending inventory balance of $412,000. The following additional information is also available: •The ending inventory balance of $412,000 did not include goods costing $48,000 that were purchased by Buffalo on December 28 and shipped FOB destination on that date. Buffalo did not receive the goods until January 2 of the following year. •The ending inventory balance of $412,000 included damaged goods at their original cost of $38,000. The net realizable value of the damaged goods was $10,000. Based on this information, the correct balance for ending inventory on December 31 is: A) $374,000 B) $384,000 C) $460,000 D) $422,000 E) $438,000

B Ending inventory = $412,000 − ($38,000-$10,000) = $384,000.

Saddleback Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation? A) Assets, $30,000 increase; equity, $30,000 increase. B) Assets, $30,000 decrease; liabilities, $30,000 decrease. C) Assets, $30,000 decrease; liabilities, $30,000 increase. D) Liabilities, $30,000 decrease; equity, $30,000 increase. E) Assets, $30,000 decrease; equity $30,000 decrease.

B Explanation: Assets = Liabilities + Equity Assets would decrease by $30,000 in Cash due to the payment of the accounts payable. Liabilities would also decrease by $30,000 in Accounts Payable due to the payment of an obligation. There is no effect on Equity.

On January 2, 2015, Kellogg Corporation acquired equipment for $300,000. The estimated life of the equipment is 5 years or 40,000 hours. The estimated residual value is $20,000. What is the book value of the asset on December 31, 2016, if Kellogg Corporation uses the straight-line method of depreciation? A) $180,000 B) $188,000 C) $240,000 D) $244,000

B $300,000 - $112,000 = $188,000 $280,000 ÷ 5 = $56,000 $56,000 × 2 = $112,000

A company's normal selling price for its product is $20 per unit. However, due to market competition, the selling price has fallen to $15 per unit. This company's current inventory consists of 200 units purchased at $16 per unit. Replacement cost has fallen to $13 per unit. Calculate the value of this company's inventory at the lower of cost or market. A) $2,550. B) $2,600. C) $2,700. D) $3,000. E) $3,200.

B 200 units @ $13 per unit = $2,600

On December 1, Victoria Company signed a 90-day, 6% note payable, with a face value of $15,000. What amount of interest expense is accrued at December 31 on the note? (Use 360 days a year.) A) $0 B) $75 C) $900 D) $225 E) $300

B Interest Expense = Principal × Interest Rate × Time Interest Expense = $15,000 × 0.06 × 30/360; Interest Expense = $75

At December 31 of the current year, a company reported the following: •Total sales for the current year: $980,000 includes $160,000 in cash sales •Accounts receivable balance at Dec. 31, end of current year: $160,000 •Allowance for Doubtful Accounts balance at January 1, beginning of current year: $7,300 •Bad debts written off during the current year: $5,800. Prepare the necessary adjusting entries to record bad debts expense assuming this company's bad debts are estimated to equal 1.5% of credit sales:

Bad Debt Expense 12,300 Allowance for doubtful account 12,300 (980,000-160,000)(.015)

A bond sells at a discount when the: A) Contract rate is above the market rate. B) Contract rate is equal to the market rate. C) Contract rate is below the market rate. D) Bond has a short-term life. E) Bond pays interest only once a year.

A company performed tax services for a client on account. The amount billed to the client was $5,000. In transaction analysis, how does this transaction affect the accounting equation? A) Add $5,000 to Cash account and add $5,000 to Service Revenue account. B) Add $5,000 to Cash account and add $5,000 to Retained Earnings account. C) Add $5,000 to Accounts Receivable account and add $5,000 to Service Revenue account. D) Add $5,000 to Accounts Payable account and add $5,000 to Service Revenue account.

ABC Company purchased land with an old building that they plan on demolishing so that they can construct a new, modern building. The cost of demolishing the building will be part of the cost of the: A) new building. B) old building. C) land. D) land improvements.

Adonis Corporation issued 10-year, 8% bonds with a par value of $200,000. Interest is paid semiannually. The market rate on the issue date was 7.5%. Adonis received $206,948 in cash proceeds. Which of the following statements is true? A) Adonis must pay $200,000 at maturity and no interest payments. B) Adonis must pay $206,948 at maturity and no interest payments. C) Adonis must pay $200,000 at maturity plus 20 interest payments of $8,000 each. D) Adonis must pay $206,948 at maturity plus 20 interest payments of $8,000 each. E) Adonis must pay $200,000 at maturity plus 20 interest payments of $7,500 each.

All of the following statements regarding long-term liabilities are true except? A) Liabilities not expected to be paid within the longer of one year or the company's operating cycle are reported as long-term liabilities. B) Long-term liabilities include long-term notes payable, warranty liabilities, lease liabilities, and bonds payable. C) Liabilities that do not have a fixed due date, but are payable on demand, are reported as long-term liabilities. D) Long-term liabilities can be reported on the balance sheet in a single total or in multiple categories. E) A single long-term liability can be divided between current and noncurrent sections on the balance sheet.

Carson Company faces a probable loss on a pending lawsuit where the amount of the loss is estimated to be $500,000. The journal entry to recognize the potential loss is: A) Debit Prepaid Legal Expense $500,000; credit Contingent Legal Liability $500,000. B) Debit Legal Expense $500,000; credit Lawsuit Payable $500,000. C) Debit Contingent Legal Expense $500,000, credit Contingent Legal Liability $500,000. D) Debit Lawsuit Payable $500,000, credit Contingent Legal Liability $500,000. E) No journal entry is required.

Contessa Company collected $42,000 cash on its accounts receivable. The effects of this transaction as reflected in the accounting equation are: A) Total assets decrease and equity increases. B) Both total assets and total liabilities decrease. C) Total assets, total liabilities, and total equity are unchanged. D) Both total assets and equity are unchanged and liabilities increase. E) Total assets increase and equity decreases.

Identify the account below that is classified as an asset account: A) Unearned Revenue B) Accounts Payable C) Supplies D) Common Stock E) Service Revenue

If a corporation issues 4,000 shares of $1 par value common stock for $8,000, the journal entry would include a credit to: A) Common Stock for $8,000. B) Paid-in Capital in Excess of Par—Common for $8,000. C) Common Stock for $4,000. D) Retained Earnings for $4,000

If accrued salaries were recorded on December 31 with a debit to Salaries Expense and a credit to Salaries Payable, and no reversing entries were made on January 1, the entry to record payment of these wages on the following January 5 would include: A) A debit to Cash and a credit to Salaries Payable. B) A debit to Cash and a credit to Prepaid Salaries. C) A debit to Salaries Payable and a credit to Cash. D) A debit to Salaries Payable and a credit to Salaries Expense. E) No entry would be necessary on January 5.

In periods of continuously rising prices, use of LIFO rather than the FIFO inventory method will have what effect on the following items? Net Income/ Cost of Goods Sold/ Gross Profit Margin a. higher higher higher b. lower higher higher c. lower higher lower d. higher lower lower e.lowerlowerlower

Mullis Company sold merchandise on account to a customer for $625. The journal entry to record this sale transaction would be: A) Debit Cash of $625 and credit Sales $625. B) Debit Cash of $625 and credit Accounts Receivable $625. C) Debit Accounts Receivable $625 and credit Sales $625. D) Debit Accounts Receivable $625 and credit Cash $625. E) Debit Sales $625 and credit Accounts Receivable $625.

On February 1, a customer's account balance of $2,300 was deemed to be uncollectible. What entry should be recorded on February 1 to record the write-off assuming the company uses the allowance method? A) Debit Bad Debts Expense $2,300; credit Accounts Receivable $2,300. B) Debit Allowance for Doubtful Accounts $2,300; credit Bad Debts Expense $2,300. C) Debit Allowance for Doubtful Accounts $2,300; credit Accounts Receivable $2,300. D) Debit Bad Debts Expense $2,300; credit Allowance for Doubtful Accounts $2,300. E) Debit Accounts Receivable $250; credit Allowance for Doubtful Accounts $2,300.

On July 1 Olive Co. paid $7,500 cash for management services to be performed over a two-year period. Olive follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. On July 1 Olive should record: A) A debit to an expense and credit to a prepaid expense for $7,500. B) A debit to an expense and credit to Cash for $7,500. C) A debit to a prepaid expense and a credit to Cash for $7,500. D) A credit to a prepaid expense and a debit to Cash for $7,500. E) A debit to Cash for $7,500 and a credit to an expense for $7,500.

On May 10, a business collected $2,200 on account. What journal entry is needed on May 10? A) Debit Accounts Payable for $2,200 and credit Accounts Receivable for $2,200. B) Debit Accounts Receivable for $2,200 and credit Revenue for $2,200. C) Debit Cash for $2,200 and credit Accounts Receivable for $2,200. D) Debit Accounts Payable for $2,200 and credit Revenue for $2,200.

Preparing a bank reconciliation on a monthly basis is an example of: A) Establishing responsibility. B) Separation of duties. C) Protecting assets by proving the accuracy of cash records. D) A technological control. E) Poor internal control.

The statement of cash flows is: A) Another name for the statement of financial position. B) A financial statement that presents information about changes in equity during a period. C) A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities. D) A financial statement that lists the types and amounts of assets, liabilities, and equity of a business on a specific date. E) A financial statement that lists the types and amounts of the revenues and expenses of a business for an accounting period.

f a company failed to make the end-of-period adjustment to move the amount of management fees that were earned from the Unearned Management Fees account to the Management Fees Revenue account, this omission would cause: A) An overstatement of net income. B) An overstatement of assets. C) An overstatement of liabilities. D) An overstatement of equity. E) An understatement of liabilities.

A company had net sales of $752,000 and cost of goods sold of $543,000. Its net income was $17,530. The company's gross margin ratio equals: A) 18.9% B) 24.5% C) 27.8% D) 34.7% E) 35.2%

C Gross Margin Ratio = (Net Sales − Cost of Goods Sold)/Net Sales Gross Margin Ratio = ($752,000 − $543,000)/$752,000 = 27.8%

Orlando Corporation incorporated on January 2, 2015. During 2015, Orlando had the following transactions: •issued 30,000 shares of common stock at $25 per share. The par value per share is $1. •purchased 5,000 shares of treasury stock at $28 per share •had net income of $400,000. What is the total amount of stockholders' equity as of December 31, 2015? A) $610,000 B) $750,000 C) $1,010,000 D) $1,150,000

C (30,000 × $25) + $400,000 - (5,000 × $28) = $1,010,000

Phoenix Agency leases office space for $7,000 per month. On January 3, Phoenix incurs $65,000 to improve the leased office space. These improvements are expected to yield benefits for 8 years. Phoenix has 5 years remaining on its lease. Compute the amount of expense that should be recorded the first year related to the improvements. A) $20,000. B) $6,000. C) $13,000. D) $65,000. E) $8,125.

C 65,000/5= 13,000

The ending bank statement balance at November 30 is $6,750. The bank statement shows a service charge of $95, electronic funds receipts of $500 and a NSF check for $350. Deposits in transit total $2,050 and outstanding checks are $1,835. The balance per books at November 30 is $6,910. What is the adjusted book balance at November 30? A) $6,750 B) $6,805 C) $6,965 D) $7,105

C 6910+500-95-350 = 6965

An employee earned $37,000 during the year working for an employer when the maximum limit for Social Security was $127,200. The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%. The employee's annual FICA taxes amount is: A) $2,294.00. B) $536.50. C) $2,830.50. D) $1,757.50. E) $8,950.50.

C FICA Taxes = Wages × (FICA tax rate + Medicare tax rate) FICA Taxes = $37,000 × (0.062 + 0.0145); FICA Taxes = $2,830.50

Portia Grant is an employee who is paid monthly. For the month of January of the current year, she earned a total of $8,260. The FICA tax for social security is 6.2% of the first $127,200 of employee earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The FUTA tax rate of .6% and the SUTA tax rate of 5.4% are applied to the first $7,000 of an employee's pay. The amount of federal income tax withheld from her earnings was $1,325.17. Her net pay for the month is: (Round your intermediate calculations to two decimal places.) A) $6,422.71 B) $6,246.94 C) $6,302.94 D) $5,868.94 E) $7,194.11

C Net Pay = Gross Pay − Federal Income Tax − FICA-SS Tax − FICA-Medicare Tax Net Pay = $8,260.00 − $1,325.17 − $512.12* - $119.77** = $6,302.94

A bond is issued at par value when: A) The bond pays no interest B) The Bond is not between interest payment dates C) Straight line amortization is used by the company D) The market rate of interest is the same value as the contract rate of interest E) The bond is callable

A company's board of directors votes to declare a cash dividend of $1.00 per share on its 12,000 common shares outstanding. The journal entry to record the declaration of the cash dividend is: A) Debit Dividend Expense $12,000; credit Cash $12,000. B) Debit Dividend Expense $12,000; credit Common Dividend Payable $12,000. C) Debit Common Dividend Payable $12,000; credit Cash $12,000. D) Debit Retained Earnings $12,000; credit Common Dividend Payable $12,000. E) Debit Common Dividend Payable $12,000; credit Retained Earnings $12,000

Jervis accepts all major bank credit cards, including those issued by Northern Bank (NB), which assesses a 3% charge on sales for using its card. On June 28, Jervis had $3,500 in NB Card credit sales. What entry should Jervis make on June 28 to record the deposit? A) Debit Cash $3,500; credit Sales $3,500 B) Debit Accounts Receivable $3,500; credit Sales $3,500 C) Debit Cash $3,605; credit Credit Card Expense $105; credit Sales $3,500 D) Debit Cash $3,395; debit Credit Card Expense $105; credit Sales $3,500 E) Debit Accounts Receivable $3,395; debit Credit Card Expense $105; credit Sales $3,500

Minor Company purchased some land and is preparing the land for a new building. Which of the following costs should be included in the cost of the land by Minor Company? A) cost of removing an old building B) cost of clearing and grading the land C) cost of 6 foot fence around property D) A and B

On January 1, Parson Freight Company issues 7%, 10-year bonds with a par value of $2,000,000. The bonds pay interest semiannually. The market rate of interest is 8% and the bond selling price was $1,864,097. The bond issuance should be recorded as: A) Debit Cash $2,000,000; credit Bonds Payable $2,000,000. B) Debit Cash $1,864,097; credit Bonds Payable $1,864,097. C) Debit Cash $2,000,000; credit Bonds Payable $1,864,097; credit Discount on Bonds Payable $135,903. D) Debit Cash $1,864,097; debit Discount on Bonds Payable $135,903; credit Bonds Payable $2,000,000. E) Debit Cash $1,864,097; debit Interest Expense $135,903; credit Bonds Payable $2,000,000.

On January 1, a company issues bonds dated January 1 with a par value of $300,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $312,177. The journal entry to record the issuance of the bond is: A) Debit Cash $312,177; credit Discount on Bonds Payable $12,177; credit Bonds Payable $300,000. B) Debit Cash $300,000; debit Premium on Bonds Payable $12,177; credit Bonds Payable $312,177. C) Debit Bonds Payable $300,000; debit Bond Interest Expense $12,177; credit Cash $312,177. D) Debit Cash $312,177; credit Premium on Bonds Payable $12,177; credit Bonds Payable $300,000. E) Debit Cash $312,177; credit Bonds Payable $312,177.

On June 1, 2014, Starbucks paid the rent of $60,000 for 30 different stores in Washington and California. The rent covers the period, June 1, 2014 through November 30, 2014. On June 1, Starbucks will record ________. On June 30, Starbucks will record ________. A) Rent Expense of $60,000; nothing B) nothing; Rent Expense of $60,000 C) nothing; Rent Expense of $10,000 D) Prepaid Rent of $60,000; Rent Expense of $10,000

Spafford Services, Inc. provides services to clients. On May 1, a client prepaid Spafford Services $30,000 for 6-months services in advance. Spafford Services' general journal entry to record this transaction will include a: A) Debit to Unearned Management Fees for $30,000. B) Credit to Management Fees Earned for $30,000. C) Credit to Cash for $30,000. D) Credit to Unearned Management Fees for $30,000. E) Debit to Management Fees Earned for $30,000.

Which of the following should be included in the cost of equipment? A) Platform for the equipment B) Employee training costs for the use of the new equipment C) Testing costs to see if the equipment is working properly D) All of the above

Which of the following transactions requires a journal entry? A) The bank charged $50 for a stop payment on a check. B) The bank deducted $50 from your account incorrectly. C) The bank collected a note receivable with interest on your behalf. D) A and C

Willow Rentals purchased $800 of office supplies on credit. Which of the following general journal entries will Willow Rentals make to record this transaction? A) Debit Accounts Payable, $800; credit Office Supplies, $800. B) Debit Accounts Receivable, $800; credit Office Supplies, $800. C) Debit Office Supplies, $800; credit Accounts Receivable, $800. D) Debit Office Supplies, $800; credit Accounts Payable, $800. E) Debit Cash, $800; credit Office Supplies, $800.

In the process of reconciling its bank statement for April, Donahue Enterprises' accountant compiles the following information: Cash balance per company books on April 30 $6,275 Deposits in transit at month-end $1,300 Outstanding checks at month-end $620 Bank charge for printing new checks $45 Note receivable and interest collected by bank on Donahue's behalf $770 A check paid to Donahue during the month by a customer is returned by the bank as NSF $480 The adjusted cash balance per the books on April 30 is: A) $6,900 B) $8,160 C) $4,600 D) $6,520 E) $5,840

D Book balance $6,275 + Note collection & interest revenue (+770) − Bank charge for printing new checks (−45) − NSF check returned by bank (−480) = Adjusted book balance $6,520

A company has sales of $375,000 and its gross profit is $157,500. Its cost of goods sold equals: A) $(217,000). B) $375,000. C) $157,500. D) $217,500. E) $532,500.

D Gross Profit = Sales − Cost of Goods Sold Cost of Goods Sold = $375,000 − $157,500 = $217,500

On January 1, Fashion Forward Magazine received $15,000 from subscribers for the annual subscriptions that it recorded in Unearned Subscription Revenue. The issues of the magazine are mailed to subscribers quarterly. What amount of subscription revenue should the magazine recognize on March 31 when the first issue is sent in March? A) $15,000. B) $1,250. C) $7,500. D) $3,750. E) $0.

D $15,000/4 = $3,750

Marjorie Company's cash balance per the books at the end of the month was $6,500. After comparing the company's records with the monthly bank statement, Marjorie's accountant identified the following reconciling items: outstanding checks, $800; deposits in transit, $700; bank service charge, $30; and NSF check, $500. The bank collection of a note receivable was $1,000 plus interest of $100. There also was an EFT payment of $100. What is the adjusted book balance at the end of the month? A) $5,970 B) $6,400 C) $6,500 D) $6,970

D 6500-30-500+1000-100 = 6970

A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28, it paid the full amount due. The amount of the cash paid on July 28 equals: A) $200. B) $1,564. C) $1,568. D) $1,600. E) $1,800.

D Cash Paid = ($1,800 − $200) = $1,600

D Credit card fee expense: $3,500 * .03 = $105 Cash received: $3,500 - $105 = $3,395

On May 31 of the current year, the assets and liabilities of Riser, Inc. are as follows: Cash $20,500; Accounts Receivable, $7,250; Supplies, $650; Equipment, $12,000; Accounts Payable, $9,300. What is the amount of equity as of May 31 of the current year? A) $49,700. B) $13,050. C) $20,500. D) $31,100. E) $40,400.

D Explanation: Assets = Liabilities + Equity Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable + Equity $20,500 + $7,250 + $650 + $12,000 = $9,300 + Equity $40,400 = $9,300 + Equity; Equity = $31,100

On December 1, Victoria Company signed a 90-day, 6% note payable, with a face value of $15,000. Assuming the company does not prepare reversing entries, what is the journal entry to record the repayment of the note on March 1? A) Debit Notes Payable, $15,225; Credit Cash, $15,225. B) Debit Notes Payable, $15,000; Credit Cash, $15,000. C) Debit Notes Payable, $15,000; Debit Interest Expense, $225; Credit Cash, $15,225. D) Debit Notes Payable, $15,000; Debit Interest Expense, $150; Debit Interest Payable, $75; Credit Cash, $15,225. E) Debit Notes Payable, $15,075; Debit Interest Expense, $150; Credit Cash, $15,225

D Interest Expense = Principal × Interest Rate × Time Interest Expense = $15,000 × 0.06 × 30/360; Interest Expense = $75 in year 1 Interest Expense = $15,000 × 0.06 × 60/360; Interest Expense = $150 in year 2

A company had the following purchases and sales during its first year of operations: Purchases Sales January: 10 units at $120 6 units February: 20 units at $125 5 units May: 15 units at $130 9 units September: 12 units at $135 8 units November: 10 units at $140 13 units On December 31, there were 26 units remaining in ending inventory. Using the Perpetual FIFO inventory valuation method, what is the cost of the ending inventory? A) $3,405. B) $3,200. C) $3,365. D) $3,540. E) $3,270.

D 4@$130 = 520 12@$135 =1,620 10@$140 =1,400 26 units $3,540

) A debit is used to record which of the following: A) A decrease in an asset account. B) A decrease in an expense account. C) An increase in a revenue account. D) An increase in the common stock account. E) An increase in the dividends account.

All of the following are employer payroll taxes except: A) Social Security tax equal to that withheld from employees. B) Medicare tax equal to that withheld from employees. C) State unemployment tax. D) Federal unemployment tax. E) Federal income tax equal to that withheld from employees.

At December 31, 2009, Rob's Home Store has $100,000 of assets and $40,000 of liabilities, and $60,000 of stockholders' equity. On January 15, 2010, Rob's purchased $30,000 of assets by incurring a liability. Rob's total assets, liabilities, and stockholders' equity after the purchase are, respectively, a. $100,000; $40,000; $60,000. b. $100,000; $60,000; $40,000. c. $130,000; $40,000; $70,000. d. $130,000; $60,000; $70,000. e. $130,000; $70,000; $60,000.

If a company made a bank deposit on September 30 that did not appear on the bank statement dated September 30, in preparing the September 30 bank reconciliation, the company should: A) Deduct the deposit from the bank statement balance. B) Send the bank a debit memorandum. C) Deduct the deposit from the September 30 book balance and add it to the October 1 book balance. D) Add the deposit to the book balance of cash. E) Add the deposit to the bank statement balance.

Ralph Pine Consulting received its telephone bill in the amount of $300 before using the service, and immediately paid it. Which of the following general journal entries will Pine Consulting make to record this transaction? A) Debit Telephone Expense, $300; Credit Cash, $300. B) Debit Telephone Expense, $300; Credit Accounts Payable, $300. C) Debit Cash, $300; Credit Telephone Expense, $300. D) Debit Accounts Payable, $300; Credit Telephone Expense, $300. E) Debit Prepaid Expense, $300; Credit Cash, $300.

The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense. Accounts receivable $435,000 Debit Allowance for Doubtful Accounts 1,250 Debit Net Sales 2,100,000 Credit All sales are made on credit. Based on past experience, the company estimates 1% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense? A) Debit Bad Debts Expense $19,750; credit Allowance for Doubtful Accounts $19,750. B) Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225. C) Debit Bad Debts Expense $22,250; credit Allowance for Doubtful Accounts $22,250. D) Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350. E) Debit Bad Debts Expense $21,000; credit Allowance for Doubtful Accounts $21,000.

E $2,100,000 * 0.01 = $21,000

On January 1, a company issued and sold a $400,000, 7%, 10-year bond payable, and received proceeds of $396,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is: A) Debit Bond Interest Expense $14,000; credit Cash $14,000. B) Debit Bond Interest Expense $28,000; credit Cash $28,000. C) Debit Bond Interest Expense $14,000; debit Discount on Bonds Payable $200; credit Cash $14,200. D) Debit Bond Interest Expense $13,800; debit Discount on Bonds Payable $200; credit Cash $14,000. E) Debit Bond Interest Expense $14,200; credit Cash $14,000; credit Discount on Bonds Payable $200.

E Cash = $400,000 × 0.07 × ½ = $14,000 Discount amortized = ($400,000 − $396,000)/20 = $200 Interest expense = $14,000 + $200 = $14,200

A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 4% of outstanding receivables are uncollectible. The current balance (before adjustments) in the allowance for doubtful accounts is an $800 debit. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for: A) $3,600 B) $3,568 C) $3,632 D) $2,800 E) $4,400

E Desired balance in allowance account: $90,000 × .04 = $3,600 credit Current balance in allowance account: +800 debit Adjustment to allowance: $4,400 credit (3600+800)

On January 1, a company issued a $500,000, 10%, 8-year bond payable, and received proceeds of $473,845. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The amount of interest expense to be recorded on June 30 is $25,000. TRUE FALSE

False (500,000* 10/100* 6/12) + (26155-16) = 26,634.69

A company has inventory with a selling price of $451,000, a market value of $223,000 and a cost of $241,000. According to the lower of cost or market, the inventory should be written down to $223,000. TRUE FALSE

True

A company has $80,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current credit balance (before adjustments) in the allowance for doubtful accounts is $1,200. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $4,800. TRUE FALSE

Financial Accounting

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