ACC 340 exam 1

Paid $950 cash for January Rent

Rent Expense 950; Cash 950

Declared and paid a $6,000 cash dividend

Retained Earnings 6,000; Cash 6,000

If the LIFO inventory method was used last period, it should be used for the current and following periods because of a. consistency. b. materiality. c. timeliness. d. verifiability.

a

Moorman Corporation reports the following information: Correction of understatement of depreciation expense in prior years, net of tax $ 1,290,000; Dividends declared 960,000; Net income 3,000,000; Retained Earnings, 1/1/20, as reported 6,000,000. Moorman should report retained earnings, 12/31/20, at

(Retained Earnings 1/1/20 - Prior Period Adjustments + Net Income - Dividends) 6,750,000

Murphy Company sublet a portion of its warehouse for five years at an annual rental of $75,000, beginning on May 1, 2020. The tenant, Sheri Charter, paid one year's rent in advance, which Murphy recorded as a credit to Unearned Rent Revenue. Murphy reports on a calendar-year basis. The adjustment on December 31, 2020 for Murphy should be

((Annual Rent * months)/ 12) = x --> x * months) 50,000

In 2020, Esther Corporation reported net income of $600,000. It declared and paid preferred stock dividends of $150,000 and common stock dividends of $60,000. During 2020, Esther had a weighted average of 300,000 common shares outstanding. Compute Esther's 2020 earnings per share.

((Net Income - Stock Dividends)/ Common Shares Outstanding) 1.50

The income statement of Dolan Corporation for 2020 included the following items: Interest revenue $141,000; Salaries and wages expense 210,000; Insurance expense 21,200. The following balances have been excerpted from Dolan Corporation's balance sheets: December 31, 2020: Interest receivable 18,200; Salaries and wages payable 17,800; Prepaid insurance 2,200 December 31, 2019: Interest receivable 15,000; Salaries and wages payable 8,400; Prepaid insurance 3,000 The cash paid for insurance premiums during 2020 was...

(2019 Prepaid Insurance - Insurance Expense + Cash Paid for Insurance Premiums = 2020 Prepaid Insurance) 20,400

On January 1, 2019, Nobel Corporation acquired machinery at a cost of $1,600,000. Nobel adopted the straight-line method of depreciation for this machine and had been recording depreciation over an estimated life of ten years, with no residual value. At the beginning of 2022, a decision was made to change to the double-declining balance method of depreciation for this machine. Assuming a 20% tax rate, the cumulative effect of this accounting change on beginning retained earnings, is

(As a change in accounting estimate, the change does not result in a prior period adjustment or restatement of prior periods) 0

Gross billings for merchandise sold by Lang Company to its customers last year amounted to $12,720,000; sales returns and allowances were $370,000, sales discounts were $175,000, and freight-out was $140,000. Net sales last year for Lang Company were

(Billings - Sales R&A - Sales Discounts ) 12,175,000

Maso Company recorded journal entries for the issuance of common stock for $200,000, the payment of $65,000 on accounts payable, and the payment of salaries expense of $105,000. What net effect do these entries have on stockholders' equity?

(Common Stock Issue - Salary Expense) 95,000

Brown Company's account balances at December 31, 2020 for Accounts Receivable and the related Allowance for Doubtful Accounts are $920,000 debit and $2,100 credit, respectively. From an aging of accounts receivable, it is estimated that $39,000 of the December 31 receivables will be uncollectible. The necessary adjusting entry would include a credit to the allowance account for

(Desired Allowance Balance - Current Allowance Balance) 36,900

Tate Company purchased equipment on November 1, 2020 and gave a 3-month, 9% note with a face value of $80,000. The December 31, 2020 adjusting entry is

(Note Face Value * % * 2/12) Interest Expense; Interest Payable 1,200

Palomo Corp has a tax rate of 20 percent and income before non-operating items of $1,785,000. It also has the following items (gross amounts): Unusual gain $ 115,000; Loss from discontinued operations 915,000; Dividend revenue 30,000; Income increasing prior period adjustment 370,000. What is the amount of income tax expense Palomo would report on its income statement?

(Operating Income + Unusual Gain + Dividend Revenue = Net Income * %) 386,000

The Note Payable carries a principal balance of $100,000, with 6% annual interest, and is paid semiannually (twice per year), on September 1 and March 1, so the next payment is scheduled for March 1, 20x2, two months after the end of the fiscal year. As of December 31, 20x1, the company should accrue four month's interest as expense for 20x1, because four months have passed since the last interest payment.

(Principal Balance * 1/2% (semi-anually) = x / months = y --> y * months since lasy payment) Interest Expense 2,000; Interest Payable 2,000

Lopez Company received $18,000 on April 1, 2020 for one year's rent in advance and recorded the transaction with a credit to a nominal account. The December 31, 2020 adjusting entry is

(Received Money / 12 = x --> x * months) Rent Revenue; Unearned Rent Revenue $4,500

Accrued salaries payable of $102,000 were not recorded at December 31, 2020. Office supplies on hand of $58,000 at December 31, 2021 were erroneously treated as expense instead of supplies inventory. Neither of these errors was discovered nor corrected. The effect of these two errors would cause a. 2021 net income to be understated $160,000 and December 31, 2021 retained earnings to be understated $58,000. b. 2020 net income and December 31, 2020 retained earnings to be understated $102,000 each. c. 2020 net income to be overstated $44,000 and 2021 net income to be understated $58,000. d.2021 net income and December 31, 2021 retained earnings to be understated $58,000 each.

(Salaries overstates NI and RE in 2020, both by $102,000. Salaries understates NI in 2021 by $102,000 and Retained Earnings self-corrects at 12/31/21. Supplies understates NI in 2021 by 58,000. RE understatement in 2021 of $58,000 from Supplies) a

Sparky, Inc., purchased equipment for $510,000, which was estimated to have a useful life of 10 years and an estimated salvage value of $10,000. Depreciation has been recorded for 7 years on the straight-line basis. In 20x8 (the 8th year), it is determined that the total estimated useful life should be 15 years, with a salvage value of $5,000. 1. What journal entry should be made in 20x8 to correct prior years' depreciation? 2. Calculate the depreciation expense for 20x8, and show the appropriate journal entry.

1. None 2. (((Equipment - Estimated Salvage Value)/ Useful Life)* # of depreciation years recorded) = Accumulated Depreciation --> ((Equipment - Accumulated Depreciation - Actual Salvage Value)/ New Estimate) 19,375. Depreciation Expense; Accumulated Depreciation 19,375

Billed customers $8,100 for services performed

Accounts Receivable 8,100; Services Revenue 8,100

Received $1,600 cash for services performed for customers

Cash 1,600; Services Revenue 1,600

Received $8,000 cash on customers' accounts

Cash 8,000; Accounts Receivable 8000

Changes in Accounting Estimates

Changes in estimates of useful life, salvage value, depreciation methods, estimates of bad debts. Not considered an error, so no prior period adjustment

Paid $50 cash to bank for interest on Notes Payable

Interest Expense 50; Cash 50

Received $410 invoice for January Utilities Expense

Utilities Expense 410; Accounts Payable 410

Which organization is responsible for issuing Emerging Issues Task Force Statements? a. The FASB b. The CAP c. The APB d. The SEC

a

A company is not required to report a per share amount on the face of the income statement for which one of the following items? a. Net income b. Prior period adjustment c. Continuing operations d. Discontinued operations

b

A journal entry to record the sale of inventory on account will include a... a. debit to Inventory. b. debit to Accounts Receivable. c. debit to Sales Revenue. d. credit to Cost of Goods Sold.

b

Which of the following properly describes a deferral? a. Cash is received after revenue is recognized. b. Cash is received before revenue is recognized. c. Cash is paid after expense is incurred. d. Cash is paid in the same time period that an expense is incurred.

b

An accrued revenue can best be described as an amount a. collected and currently matched with expenses. b. collected and not currently matched with expenses. c. not collected and currently matched with expenses. d. not collected and not currently matched with expenses.

c

In classifying the elements of financial statements, the primary distinction between revenues and gains is a. the materiality of the amounts involved. b. the likelihood that the transactions involved will recur in the future. c. the nature of the activities that gave rise to the transactions involved. d. the costs versus the benefits of the alternative methods of disclosing the transactions involved.

c

When a company discontinues an operation and disposes of the discontinued operation (component), the transaction should be included in the income statement as a gain or loss on disposal reported as a. a prior period adjustment. b. an extraordinary item. c. an amount after continuing operations. d. a bulk sale of plant assets included in income from continuing operations.

c

Where must earnings per share be disclosed in the financial statements to satisfy generally accepted accounting principles? a. On the face of the statement of retained earnings (or, statement of stockholders' equity.) b. In the footnotes to the financial statements. c. On the face of the income statement. d. On the face of the balance sheet.

c

Which basic assumption is illustrated when a firm reports financial results on an annual basis? a. Economic entity assumption b. Going concern assumption c. Periodicity assumption d. Monetary unit assumption

c

Which of the following is a requirement for an accounting principle to be called "generally accepted"? a. An authoritative accounting rule-making body has established it in an official pronouncement. b. The principle has been accepted as appropriate because of its universal application. c. An authoritative accounting rule-making body has established it and it has been accepted because of its universal application. d. Each company develops its own standards.

c

Which of the following is of interest to investors in decision-making? a. Assessing the company's ability to generate net cash inflows. b. Assessing management's ability to protect and enhance the capital providers' investments. c. Both assessing the company's ability to generate net cash inflows and assessing management's ability to protect and enhance the capital provider's investments. d. Assessing the company's ability to collect debts.

c

Which of the following is true of accounting for changes in estimates? a. A company recognizes a change in estimate by making a retrospective adjustment to the financial statements. b. A company accounts for changes in estimates only in the period of change, even though it affects the future periods. c. Changes in estimates are not carried back to adjust prior years. d. Changes in estimates are considered as errors.

c

Which type of account is always debited during the closing process? a. Dividends b. Expense c. Revenue d. Retained earnings

c

Stone Company changed its method of pricing inventories from FIFO to LIFO. What type of accounting change does this represent? a. A change in accounting estimate for which the financial statements for prior periods included for comparative purposes should be presented as previously reported. b. A change in accounting principle for which the financial statements for prior periods included for comparative purposes should be presented as previously reported. c. A change in accounting estimate for which the financial statements for prior periods included for comparative purposes should be restated. d. A change in accounting principle for which the financial statements for prior periods included for comparative purposes should be restated.

d

What is a purpose of having a conceptual framework? a. To make sure that economic activity can be identified with a particular legal entity. b. To segregate activities among different companies. c. To provide comparable information for different companies. d. To enable the profession to more quickly solve emerging practical problems and to provide a foundation from which to build more useful standards.

d

Which of the following organizations has been responsible for setting U.S. accounting standards? a. The Accounting Principles Board. b. The Committee on Accounting Procedure. c. The Financial Accounting Standards Board. d. All of the answer choices are correct.

d

Year-end net assets would be overstated and current expenses would be understated as a result of failure to record which of the following adjusting entries? a. Expiration of prepaid insurance b. Depreciation of fixed assets c. Use of supplies d. All of these answer choices are correct.

d