Acc 103 Final

Preferred stockholders usually have the right to vote. true false

false

The Allowance for Doubtful Accounts is a contra-revenue account. true false

false

Treasury Stock is an asset account with a normal debit balance. true false

false

Unearned Revenues are classified as a current asset. true false

false

The book value of a plant asset is the difference between the asset's fair market value and accumulated depreciation. True False

false

The carrying value of a plant asset always equals its fair market value. true false

false

Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be $9,600 $14,160 $9,840 $11,760

$11,760

If common stock is issued for an amount greater than par value, the excess should be credited to A. Additional Paid In Capital B. Retained Earnings C. Cash D. Legal Capital

A. Additional Paid In Capital

Carson Packaging Corporation began business in 2015 by issuing 30,000 shares of $3 par common stock for $8 per share and 12,000 share of 6%, $10 par preferred stock for par. At year end, the common stock had a market value of $12. On its December 31, 2015 balance sheet, Carson Packaging would report A. Common Stock of $90,000 B. Common Stock of $240,000 C. Additional Paid In Capital of $90,000 D. Common Stock of $360,000

A. Common Stock of $90,000

Treasury stock is A. a corporation's own stock which has been reacquired. B. stock of an outside corporation which is purchased and held as an investment in the treasury. C. corporate stock issued by the treasurer of a company. D. stock issued by the U.S. Treasury Department.

A. a corporation's own stock which has been reacquired.

Hsu, Inc. issued 10,000 shares of stock at a stated value of $8/share. The total issue of stock sold for $15 per share. The journal entry to record this transaction would include a A. credit to Common Stock for $80,000 B. credit to Common Stock for $150,000 C. debit to Cash for $80,000 D. credit to Additional Paid In Capital for $150,000

A. credit to Common Stock for $80,000

Bruno Company purchased equipment on January 1, 2015 at a total invoice cost of $280,000; additional costs of $5,000 for freight and $25,000 for installation were incurred. The equipment has an estimated salvage value of $10,000 and an estimated useful life of five years. The amount of accumulated depreciation at December 31, 2016 if the straight-line method of deprecation is used is: A. $120,000 B. $124,000 C. $110,000 D. $108,000

A. $120,000

On January 2, 2012, Marshall Inc. issued 5,000 shares of 6% cumulative preferred stock at $100 par value. On December 31, 2015, Marshall Inc. declared and paid its first dividend. What dividends are the preferred stockholders entitled to receive in the current year before any distribution is made to common stockholders? (Hint: Be careful about the dates) A. $120,000 B. $90,000 C. $0 D. $30,000

A. $120,000

Nietzsche Company purchased a machine on January 1, 2015 for $350,000. the machine has an estimated useful life of five years and a salvage value of $50,000. The machine is being depreciated using the double-declining balance method. The book value at December 31, 2016 (after depreciation expense for the year has been recorded) is: A. $126,000 B. $158,000 C. $170,000 D. $224,000

A. $126,000

The cash account shows a balance of $45,000 before reconciliation. The bank statement does not include a deposit of $2,500 made on the last day of the month. The bank statement shows a collection by the bank of $1,200 and a customer's check for $320 was returned because it was NSF. A customer's check for $450 was recorded on the books as $540, and a check written for $69 was recorded as $96. The correct balance in the cash account was A. $45,817 B. $45,790 C. $46,200 D. $48,317

A. $45,817

Renn Company acquires land for $56,000 cash. Additional costs are as follows: Removal of shed $ 300 Filling and grading 1,500 Broker commission 1,130 Paving of parking lot 10,000 Closing costs 560 Renn received $120 cash for the lumber which was salvaged from the removal of the shed. Renn will record the acquisition cost of the land as A. $59,370 B. $57,690 C. $59,610 D. $56,000

A. $59,370

Which of the following would be added to the balance per books on a bank reconciliation? A.) Collection of note by bank B.) NSF check C.) Outstanding checks D.) Deposits in transit

A. Collection of note by bank

Craddock Company issued 6%, 10-year bonds with a face amount of $1,000,000 for $1,020,000. The bonds pay interest semi-annually on June 30 and December 31 of each year. The semi-annual straight-line amortization of the premium on bonds payable will A. decrease interest expense by $1,000. B. increase interest expense by $20,000 C. decrease interest expense by $2,000. D. not impact interest expense or the carrying value of the bond

A. Decrease interest expense by $1,000

Which of the following would be deducted from the balance per bank on a bank reconciliation? A. Outstanding checks. B. Service charge. C. Electronic funds transfer to supplier. D. Deposits in transit.

A. Outstanding Checks.

Which of the following would not be classified as a plant asset? A. Supplies B. Buildings C. Land Improvements D. Land

A. Supplies

Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is debited A. when an account is determined to be uncollectible and is written-off. B. when a credit sale is past due. C. at the end of each accounting period. D. whenever a pre-determined amount of credit sales have been made.

A. When an account is determined to be uncollectible and is written-off.

All of the following are intangible assets except A. accounts receivable B. patents C. trademarks D. copyrights

A. accounts receivable

An aging of a company's accounts receivable indicates that $14,000 are estimated to be uncollectible. If the Allowance for Doubtful Accounts has a $1,100 credit balance, the adjustment to record bad debts for the period will require a A. debit to Bad Debt Expense for $12,900 B. a credit to the Allowance for Doubtful Accounts for $14,000 C. debit to Bad Debt Expense for $14,000 D. debit to the Allowance for Doubtful Accounts for $12,900

A. debit to bad debt expense for $12,900

An aging of a company's accounts receivable indicates that $3,000 are estimated to be uncollectible. If the Allowance for Doubtful Accounts has a $800 debit balance, the adjustment to record bad debts for the period will require a A. debit to Bad Debt Expense for $3,800 B. debit to Bad Debt Expense for $3,000 C. credit to the Allowance for Doubtful Accounts for $800 D. debit to Bad Debt Expense for $2,200

A. debit to bad debt expense for $3,800

On October 1, 2015, Frank, Inc. issued a $28,000, 10%, nine-month interest-bearing note. If Frank, Inc. is preparing financial statements at December 31, 2015, the adjusting entry for accrued interest will include a A. debit to Interest Expense for $700 B. credit to Interest Payable for $1,400 C. debit to Interest Expense for $933. D. credit to Notes Payable for $700

A. debit to interest expense for $700

A corporation purchases 40,000 shares of its own $30 par common stock for $45 per share, recording it at cost. What will be the effect on total stockholders' equity? A. decrease by $1,800,000 B. increase by $1,800,000 C. increase by $1,200,000 D. decrease by $1,200,000

A. decrease by $1,800,000

If a company fails to record estimated bad debt expense A. expenses are understated. B. liabilities are understated. C. revenues are understated. D. receivables are understated.

A. expenses are understated

Jefferson Company purchased a piece of equipment on January 1, 2015. The equipment cost $60,000 and has an estimated life of 8 years and a salvage value of $8,000. What was the depreciation expense for the asset for 2016 under the double-declining-balance method? A. $11,250 B. $15,000 C. $6,562 D. $6,500

A.$11,250

Who declares corporate dividends? A. Board of Directors B. CEO (Chief Executive Officer) C. CFO (Chief Financial Officer) D. Stockholders

A.Board of Directors

Chase Inc. sells 2,000 shares of treasury stock that were purchased for $32,000 at $20/share. The entry to record this sale should include a credit to A. Retained Earnings $8000 B. Paid-In Capital from Treasury Stock $8000 C. Loss from Sale of Treasury Stock $8000 D. Gain from Sale of Treasury Stock $8000

B. Paid-In Capital from Treasury Stock

What is the par value of The Walt Disney Company common stock? A. $32 B. $.01 C. $.50 D. $1

B. $.01

A company has net credit sales of $700,000 for the year and it estimates that uncollectible accounts will be 2% of sales. If the Allowance for Doubtful Accounts has a credit balance of $1,000 prior to adjustment, its balance after adjustment will be a credit of A. $13,980 B. $15,000 C. $14,000 D. $13,000

B. $15,000

Bargain Company has $1,500,000 of bonds outstanding. The unamortized premium is $19,600. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption? A. $4,600 loss B. $4,600 gain C. $15,000 gain D. $15,000 loss

B. $4,600 gain

On January 1, 2016, Marks Inc. issued $5,000,000, 6%, 10 year bonds at 97. The bonds pay interest semi-annually on June 30 and December 31. Which of the following statements is false? A. The Marks, Inc. bonds were issued at a discount. B. When the bonds mature (at the end of the 10 years), Marks, Inc. will have to pay back cash totaling $4,850,000. C. On January 1, 2016, Marks, Inc. received cash of $4,850,000. D. The semi-annual cash payments to bondholders will be $150,000.

B. When the bonds mature (at the end of the 10 years), Marks, Inc. will have to pay back cash totaling $4,850,000

Trade accounts receivable are valued and reported on the balance sheet A.in the investment section B. at net realizable value C. only if they are not past due D. at gross amounts less sales returns and allowances

B. at net realizable value

On January 1, 2015, Ward Corporation issued $5,000,000 8%, 10-year bonds at 103. The journal entry to record the issuance will show a A. credit to Cash for $5,150,000. B. credit to Premium on Bonds Payable for $150,000. C. credit to Bonds Payable for $5,030,000. D. debit to Cash of $5,000,000

B. credit to premium on bonds payable for $150,000

An aging of a company's accounts receivable indicates that $5,000 are estimated to be uncollectible. If the Allowance for Doubtful Accounts has a $2,000 debit balance, the adjustment to record bad debts for the period will require a A. credit to the Allowance for Doubtful Accounts for $2,000 B. debit to Bad Debt Expense for $7,000 C. debit to Bad Debt Expense for $5,000 D. debit to Bad Debt Expense for $3,000

B. debit to bad debt expense for $7,000

In large companies, the independent internal verification procedure is often assigned to A. management B. internal auditors C. computer operators D. outside CPAs

B. internal auditors

Allowance for Doubtful Accounts on the balance sheet A. increases the net realizable value of accounts receivable. B. is a contra-account to accounts receivable. C. is offset against total current assets. D. appears under the heading "Other Assets".

B. is a contra-account to accounts receivable

In preparing its bank reconciliation for the month of April 2016, Delano, Inc. has available the following information: Balance per bank statement, 4/30/16...................................................$39,300 NSF check returned with 4/30/16 bank statement...................................... 470 Deposits in transit, 4/30/16.....................................................................5,000 Outstanding checks, 4/30/16..................................................................5,200 Bank service charges for April................................................................. 30 What should be the adjusted cash balance at April 30, 2016? A. $39,010 B. $39,100 C. $38,630 D. $38,800

B.$39,100

A company purchased office equipment for $20,000 and estimated a salvage value of $4,000 at the end of its 5-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is A. 20% B. 4% C. 40% D. 25%

C. 40%

From an internal control standpoint, the asset most susceptible to improper diversion and use is A. buildings B. prepaid insurance C. cash D. land

C. Cash

When two or more people get together for the purpose of circumventing prescribed controls, it is called A. a division of duties B. a fraud committee C. collusion D. bonding of employees

C. Collusion

Liberty, Inc. has 2,500 shares of 4%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2014, and December 31, 2015. The board of directors declared and paid a $3,000 dividend in 2014. In 2015, $18,000 of dividends are declared and paid. What are the dividends received by the preferred and common shareholders in 2015? A. Preferred: $9,000 Common: $9,000 B. Preferred: $5,000 Common: $13,000 C. Preferred: $7,000 Common: $11,000 D. Preferred: $11,000 Common: $7,000

C. Preferred: $7,000 Common: $11,000

On January 1, the Montesque Corporation issued $300,000, 5 year, 10% bonds at 98 with interest payable semi-annually on June 30 and December 31. The entry on June 30 to record payment of bond interest and the amortization of bond discount using the straight-line method will include a: A. debit to Discount on Bonds Payable, $1,200 B. credit to Cash, $15,600 C. credit to Discount on Bonds Payable, $600 D. debit to Interest Expense, $15,000

C. credit to discount on bonds payable $600

Recording depreciation each period is necessary in accordance with the A. going concern principle B. cost principle C. matching principle D. asset valuation principle

C. matching principle

Dividends in arrears on cumulative preferred stock A. are a current liability on the balance sheet. B. are a long-term liability on the balance sheet. C. only occur when preferred dividends have been declared. D. should be disclosed in the notes to the financial statements.

D. should be disclosed in the notes to the financial statements.

Which of the following factors does not affect the initial market price of a stock? A. the company's anticipated future earnings B. the current state of the economy C. the expected dividend rate per share D. the par value of the stock

D. the par value of the stock

The Interest Expense on a $1,000, 4%, 3-month note is A. $120 B. $100 C. $40 D. $10

D. $10

Raptor Company's trial balance at December 31 reports Bonds Payable of $100,000 and Premium on Bonds Payable of $4,500. The bonds will be reported on the balance sheet at a carrying value of A. $100,000 B. $4,500 C. $95,500 D. $104,500

D. $104,500

Hooke Company received proceeds of $377,000 when it issued $400,000, 8%, 10-year bonds on January 1, 2014. The bonds pay interest semi-annually on June 30 and December 31, and Hooke uses the straight-line method of amortization. What is the amount of cash Hooke Company will pay out for interest each June 30 and December 31? A. $17,150 B. $15,080 C. $14,850 D. $16,000

D. $16,000

On January 1, Abbie Corporation issued $500,000 of 12%, 6 year bonds with interest payable semi-annually on June 30 and December 31. The bonds were issued for $530,000. Using the straight line method, on the first interest date, the debit to Interest Expense is for: A. $32,500 B. $31,800 C. $30,000 D. $27,500

D. $27,500

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 A. $62,100 B. $44,100 C. $45,000 D. $45,900

D. $45,900

On February 1, Lowery Company received a $5,000, 10%, 4-month note receivable. The cash to be received by Lowery Company when the note becomes due is A. $5,000 B. $5,500 C. $167 D. $5,167

D. $5167

On July 15, Fowler Company sells merchandise on account to Coffey Co. for $1,500, terms 2/10, n/30. On July 20, Coffey Co. returns merchandise worth $600 to Fowler Company. On July 24, payment is received from Coffey Co. for the balance due. What is the amount of cash received? A. $1,500 B. $900 C. $870 D. $882

D. $822

Under the Allowance Method, when an account becomes uncollectible and must be written off, A. Allowance for Doubtful Accounts should be credited B. Sales should be debited C. Bad Debt Expense should be credited D. Accounts Receivable should be credited

D. Accounts receivable should be credited

The asset most susceptible to theft and misuse is A. Factory Machinery B. Prepaid Insurance C. Trademarks D. Cash

D. Cash

An adjusting entry is required for all of the following except A. Collection of note by bank B. Bank service charge C. NSF check D. Deposit in transit

D. Deposit in Transit

Which of the following would be added to the balance per bank on a bank reconciliation? A. NSF check. B. Outstanding checks. C. Service charge. D. Deposits in transit.

D. Deposits in Transit

Storing cash in a company safe is an application of which internal control principle? A. Establishment of responsibility B. Documentation procedures C. Segregation of duties D. Physical controls

D. Physical controls

Bad Debt Expense is reported on the income statement as A. part of cost of goods sold. B. a contra-revenue account. C. reducing gross profit. D. an operating expense.

D. an operating expense

To record Bad Debt Expense using the allowance method, the adjusting entry would be a A. debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts. B. debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable. C. debit to Loss on Credit Sales and a credit to Accounts Receivable. D. debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts.

D. debit to bad debt expense and a credit to allowance for doubtful accounts

On January 1, 2015, Hernandez Corporation issued $2,000,000, 8%, 10-year bonds at 98. The journal entry to record the issuance will show a A. credit to Bonds Payable for $2,040,000 B. debit to Cash of $2,000,000 C. credit to Discount on Bonds Payable for $40,000 CorrectD. debit to Cash for $1,960,000

D. debit to cash of $1,960,000

Employer payroll taxes do not include: A. FICA taxes B. federal unemployment taxes C. state unemployment taxes D. federal income taxes

D. federal income taxes

Plato Company acquired land with a purchase price of $150,000. Plato Company also paid an attorney's fee of $6,000, demolition and removal costs of an old building $4,000, and grading and filling the land $3,000. The land should be recorded at A. $150,000 B. $157,000 C. $137,000 D. $163,000

D.$163,000

A plant asset cost $27,000 when it was purchased on January 1, 2008. It was depreciated by the straight-line method based on a 9-year life with no salvage value. On June 30, 2015, the asset was discarded with no cash proceeds. What gain or loss should be recognized on the disposal? A. $3,000 gain B. $6,000 loss C. No gain or loss D. $4,500 loss

D.$4,500

A factory machine was purchased for $60,000 on January 1, 2006. It was estimated that it would have a $12,000 salvage value at the end of its 5-year useful life. It was also estimated that the machine would be run 40,000 hours in the 5 years. The company ran the machine for 4,000 actual hours in 2006. If the company uses the units-of-activity method of depreciation, the amount of depreciation expense for 2006 would be A. $9,600 B. $6,000 C. $12,000 D. $4,800

D.$4,800

On a bank reconciliation, outstanding checks are added to the balance per books to obtain the adjusted balance per books. True False

False

Only large companies need to be concerned with a system of internal control. True False

False

Bad Debt Expense is reported in the income statement as a selling expense in the operating expenses section. True False

True

Internal control is most effective when only one person is responsible for a given task. True False

True

The direct write-off method is not acceptable in accounting unless uncollectible accounts are insignificant. True False

True

The percentage of sales basis for estimating uncollectibles emphasizes income statement relationships. True False

True

The three main factors (the fraud triangle) that contribute to fraudulent activity are: Opportunity, Financial Pressure and Rationalization. True False

True

Under the direct write-off method, bad debt expense is not estimated and an allowance account is not used. True False

True

The cost of equipment includes the cash price, freight charges, expenditures required for assembling, motor vehicle licenses, and accident insurance. True False

false

The cost of tearing down an old building on a newly purchased lot to make the site suitable for a new building should be debited to Buildings. True False

false

On May 1, 2015, Bentham Company sells office furniture for $60,000 cash. The office furniture originally cost $150,000 when purchased on January 1, 2008. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $15,000. What depreciation expense should be recorded on this asset in 2015? A. $5,000 B. $13,500 C. $4,500 D. $6,750

c. $4,500

The current state individual income tax rate in Illinois is 7.7% true false

false

Par value is indicative of the worth or market value of the stock. true false

false

A highly automated computerized system of accounting eliminates the need for internal control. true false

false

Accounts Receivable and the Allowance for Doubtful Accounts both have a normal debit balance. true false

false

Cash is generally listed last in the current asset section of the balance sheet. true false

false

Discount on Bonds Payable is a contra account to Bonds Payable and has a normal credit balance. true false

false

Internal auditors are specialists hired from other companies to evaluate the effectiveness of the company's system of internal control. True False

false

A corporation is a legal entity separate and distinct from its owners. true false

true

A discount on bonds is an additional cost of borrowing and should be recorded as additional interest expense over the life of the bonds. true false

true

Additional Paid-In Capital has a normal credit balance. true false

true

An advantage of the corprorate form of business is the limited liability of stockholders. true false

true

Common Stock has a normal credit balance. true false

true

Federal income tax, state income tax and FICA (Social Security and Medicare) are examples of three common payroll withholdings which are an expense of the employee. true false

true

If $500,000, 5%, 10 year bonds with a carrying value of $476,000 are redeemed at 97, a loss on redemption will be recorded. true false

true

If the proceeds from the sale of a plant asset exceed the asset's book value, a gain should be recognized. true false

true

In general, documents should be prenumbered and all documents should be accounted for. true false

true

The amount of stock that a corporation is authorized to sell is indicated in its charter. true false

true

The carrying value of bonds at maturity should be equal to the face value of the bonds. true false

true

The double declining balance method is an accelerated method of depreciation. true false

true

Under the direct write-off method, no attempt is made to match bad debt expense to sales revenues in the same accounting period. True False

true

Using the double-declining balance method of depreciation, the depreciation expense for an asset with an 8 year estimated useful life would be the book value of the asset at the beginning of the year x 25%. true false

true

Wages Payable, Notes Payable, Unearned Revenue and Accounts Payable are all liability accounts with normal credit balances. true false

true