account for managers exam 1

Glasgow Enterprises started the period with 65 units in beginning inventory that cost $3.40 each. During the period, the company purchased inventory items as follows. Glasgow sold 335 units after purchase 3 for $11.60 each. Purchase No. of Items Cost 1 310 $ 3.90 2 145 $ 4.00 3 60 $ 4.40 Glasgow's cost of goods sold under FIFO would be:

$1,274.

The balance sheet of the Algonquin Company reported assets of $50,000, liabilities of $22,000 and common stock of $15,000. Based on this information only, the amount or balance for retained earnings must be:

$13000 (50000-22000-15000)

Hancock Medical Supply Co., which had no beginning balance in its Accounts Receivable and Allowance for Doubtful Accounts, earned $82,500 of revenue on account during Year 1. During Year 1, Hancock collected $65,800 of cash from its receivables accounts. The company estimates that it will be unable to collect 1% of revenue on account. The amount of net realizable value of receivables on the December 31, Year 1 balance sheet would be:

$15,875.

On January 1, Year 1 XYZ Company paid $84,000 cash to purchase a truck. The truck has a $6,000 salvage value and a 4 year useful life. XYZ uses double declining balance depreciation. How much depreciation expense would XYZ report on its Year 2 income statement?

$21,000

Jones Company issued bonds with a $300,000 face value on January 1, Year 1. The five-year term bonds were issued at 97 and had a 7.00% stated rate of interest that is payable in cash on December 31st of each year. Jones amortizes the bond discount using the straight-line method. Based on this information: The amount of interest expense shown on Jones's December 31, Year 1 income statement would be:

$22,800.

The Hoover Company acquired the Burgess Company for $1,200,000 cash. The fair value of Burgess's assets was $1,040,000, and the company had liabilities of $60,000. How much goodwill will be recorded in connection with the acquisition?

$220,000

Vargas Company uses the perpetual inventory method. Vargas purchased 1,700 units of inventory that cost $18.00 each. At a later date the company purchased an additional 2,100 units of inventory that cost $19.00 each. Vargas sold 1,800 units of inventory for $22.00. If Vargas uses a FIFO cost flow method, the amount of cost of goods sold appearing on the income statement will be:

$32,500.

The Miller Company earned $131,000 of revenue on account during Year 2. There was no beginning balance in the accounts receivable and allowance accounts. During Year 2, Miller collected $86,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account. The net realizable value of Miller's receivables at the end of Year 2 was:

$41,070.

On January 1, Year 1, Friedman Company purchased a truck that cost $52,000. The truck had an expected useful life of 200,000 miles over 8 years and an $9,000 salvage value. During Year 2, Friedman drove the truck 27,000 miles. The amount of depreciation expense recognized in Year 2 assuming that Friedman uses the units-of-production method is:

$5,805.

Anton Co. uses the perpetual inventory method. Anton purchased 680 units of inventory that cost $8 each. At a later date the company purchased an additional 810 units of inventory that cost $10 each. If Anton uses the FIFO cost flow method and sells 1,050 units of inventory, the amount of cost of goods sold will be:

$9,140.

Allegheny Company ended Year 1 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $74,000 and $3,900, respectively. During Year 2, Allegheny wrote off $7,200 of Uncollectible Accounts. After aging its receivables, Allegheny estimates that the ending Allowance for Doubtful Accounts balance should be $6,000. What will Allegheny report as Uncollectible Accounts Expense on its Year 2 income statement?

$9,300

As of December 31, Year 1, Mason Company had $500 cash. During Year 2, Mason earned $1,200 of cash revenue and paid $800 of cash expenses. The amount of cash shown on the balance sheet at the end of Year 2 would be:

$900 (500+1200-800)

Gomez Company collected $19,500 on September 1, Year 1 from a customer for services to be provided over a one-year period beginning on that date. How much revenue would Gomez Company report related to this contract on its income statement for the year ended December 31, Year 1? How much would it report as cash flows from operating activities for Year 1?

(19500 * 4/12)= 6500; 19500

Jason Company paid $4,800 for one year's rent in advance beginning on October 1, Year 1. Jason's Year 1 income statement would report rent expense, and its statement of cash flows would report cash outflow for rent, respectively, of

(4800*3/12)= 1200; 4800

Revenue on account amounted to $7,600. Cash collections of accounts receivable amounted to $5,000. Expenses for the period were $3,900. The company paid dividends of $1,350. Net income for the period was

(7600-3900=) $3700

The following accounts and balances were drawn from the records of Carolina Company on December 31, Year 1: Cash $ 4,000 Accounts receivable $ 3,400 Dividends $ 2,000 Common stock $ 3,900 Land $ 3,200 Revenue $ 3,200 Accounts payable $ 1,800 Expense $ 2,200 Total assets on Carolina's December 31, Year 1 balance sheet would amount to:

10600

At March 31, Cummins Co. had a balance in its cash account of $10,600. At the end of March the company determined that it had outstanding checks of $1,145, deposits in transit of $710, a bank service charge of $40, and an NSF check from a customer for $225. The true cash balance at March 31 is:

10600-40-225= 10335

Assume the perpetual inventory method is used. 1) The company purchased $13,500 of merchandise on account under terms 2/10, n/30. 2) The company returned $3,000 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $21,000 cash. The net cash flow from operating activities as a result of the four transactions is:

10710 total sales value = 21000 (13500-3000)*(100%-2%) 10500*98% 10290 21000-10290=10710

The inventory records for Radford Co. reflected the following Beginning inventory @ May 1 1,300 units @ $ 4.20 First purchase @ May 7 1,400 units @ $ 4.40 second purchase @ May 17 1,600 units @ $ 4.50 Third purchase @ May 23 1,200 units @ $ 4.60 Sales @ May 31 4,200 units @ $ 6.10 Determine the amount of cost of goods sold assuming the LIFO cost flow method.

18880

Prior to closing, Syracuse Company's accounting records showed the following balances: Retained earnings $ 16,800 Service revenue 21,750 Interest revenue 1,800 Salaries expense 12,300 Operating expense 3,450 Interest expense 900 Dividends 2,700 After closing, Syracuse's retained earnings balance would be

21000

On January 1, Year 1, Friedman Company purchased a truck that cost $30,000. The truck had an expected useful life of 8 years and an $7,000 salvage value. The book value of the truck at the end of Year 1, assuming that Friedman uses the double-declining-balance method, is:

22500

Sheldon Company began Year 1 with $1,500 in its supplies account. During the year, the company purchased $4,400 of supplies on account. The company paid $2,400 on accounts payable by year end. At the end of Year 1, Sheldon counted $2,500 of supplies on hand. Sheldon's financial statements for Year 1 would show:

2500 of supplies; (1500+4400-2500) 3400 of supplies expenses

Warren Enterprises had the following events during Year 1: The business issued $36,000 of common stock to its stockholders. The business purchased land for $28,000 cash. Services were provided to customers for $32,000 cash. Services were provided to customers for $21,000 on account. The company borrowed $32,000 from the bank. Operating expenses of $28,000 were incurred and paid in cash. Salary expense of $2,400 was accrued. A dividend of $20,000 was paid to the stockholders of Warren Enterprises. Assuming the company began operations during Year 1, the amount of retained earnings as of December 31, Year 1 would be:

2600

Nelson Company experienced the following transactions during Year 1, its first year in operation. Issued $8,800 of common stock to stockholders. Provided $5,100 of services on account. Paid $2,300 cash for operating expenses. Collected $3,300 of cash from accounts receivable. Paid a $240 cash dividend to stockholders. The amount of net income recognized on Nelson Company's Year 1 income statement is:

2800

Rosewood Company made a loan of $7,400 to one of the company's employees on April 1, Year 1. The one-year note carried a 6% rate of interest. The amount of interest revenue that Rosewood would report during the years ending December 31, Year 1 and Year 2, respectively, would be:

333 and 111

West Company borrowed $30,000 on September 1, Year 1 from the Valley Bank. West agreed to pay interest annually at the rate of 5% per year. The note issued by West carried an 18-month term. Based on this information the amount of interest expense appearing on West's Year 1 income statement would be:

500

Prior to closing, Syracuse Company's accounting records showed the following balances: Retained earnings $ 7,250 Service revenue 8,350 Interest revenue 1,150 Salaries expense 5,200 Operating expense 1,700 Interest expense 850 Dividends 1,450

7550

The following account balances were drawn from the financial statements of Grayson Company: Cash $ 5,000 Accounts payable $ 1,550 Accounts receivable $ 2,100 Common stock ? Land $ 8,600 Retained earnings, Jan.1 $ 3,300 Revenue $ 10,100 Expenses

8300

Assume the perpetual inventory method is used. 1) The company purchased $12,400 of merchandise on account under terms 2/10, n/30. 2) The company returned $1,900 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $18,800 cash. The amount of gross margin from the four transactions is:

8510

On September 30, the bank statement of Fine Company showed a balance of $13,250. The following information was revealed by comparing the bank statement to the cash balance in Fine's accounting records: (1) deposits in transit amounted to $5,415 (2) outstanding checks amounted to $9,710 (3) a $780 check was incorrectly drawn on Fine's account (4) NSF checks returned by the bank were $1,280 (5) bank service charge was $45 (6) credit memo for $190 for the collection of one of the company's account receivable Based on the above information, the true cash balance was:

9735

Which of the following would most likely not be expensed using the straight-line method?

A timber reserve.

Use the following account numbers and corresponding account titles to answer the following question. Account No. Account Title (1) Cash (2) Merchandise inventory (3) Cost of goods sold (4) Transportation-out (5) Dividends (6) Common stock (7) Selling expense (8) Loss on the sale of land (9) Sales Which accounts would appear on the balance sheet?

Account numbers 1, 2, and 6.

Use the following account numbers and corresponding account titles to answer the following question. Account No. Account Title (1) Cash (2) Merchandise inventory (3) Cost of goods sold (4) Transportation-out (5) Dividends (6) Common stock (7) Selling expense (8) Loss on the sale of land (9) Sales Which accounts would appear on the income statement?

Account numbers 3, 4, 7, 8, and 9.

Which of the following terms is used to identify the expense recognition for intangible assets?

Amortization.

Which of the following represents the impact of a taxable cash sale of $960 on the accounting equation if the sales tax rate is 5%?

An increase to cash for $1,008, an increase to sales tax payable for $48, and an increase to sales revenue for $960.

Pace Company issued at 97 bonds with a face value of $200,000. As a result of the issue:

Assets and liabilities would both increase by $194,000.

The amount of accumulated depreciation is shown on the:

Balance Sheet

Which of the following items would be least likely to appear in the current liabilities section of a classified balance sheet?

Bonds Payable.

The party who borrows money in a note payable is known as the:

Both Maker and Issuer.

Which of the following businesses is most likely to use a specific identification cost flow method?

Car dealership

Butte Company recognized $24,000 of revenue on the cash sale of merchandise that cost $11,000. How will the sale be reported on the statement of cash flows?

Cash inflow from operating activities

Which of the following items is an example of revenue?

Cash received from customers at the time services were provided

Which of the following is not a generally recognized internal control procedure?

Customer service comment cards

Which of the following is considered an accelerated depreciation method?

Double-declining-balance

When the cost of purchasing inventory is declining, which inventory cost flow method will produce the highest amount of cost of goods sold?

FIFO.

Which of the following groups has the primary responsibility for establishing generally accepted accounting principles for business entities in the United States?

Financial Accounting Standards Board.

In which section of a statement of cash flows would the payment of cash dividends be reported?

Financing activities

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

Generally Accepted Accounting Principles

Which of the following statements is correct regarding accounting treatment of goodwill?

Goodwill is recorded as an asset and is not written off as an expense unless its value decreases.

Which of the following statements accurately describes a fidelity bond?

Insurance that the company buys to protect itself from loss due to employee dishonesty

Which of the following terms is applied to long-term assets that have no physical substance and provide rights, privileges and special opportunities to businesses?

Intangible assets

Policies and procedures designed to reduce the opportunities for fraud are often called:

Internal controls.

A review of the bank statement and accounting records of the Blake Company revealed the following items: Item no. Description 1) Three outstanding checks 2) A debit memo showing a bank service charge 3) A deposit in transit 4) An NSF check written by one of Blake's customers 5) A certified check written by Blake 6) A credit memo reflecting interest revenue earned by Blake Which of the item(s) would be added to the unadjusted bank balance to determine the true cash balance?

Item number 3

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

LIFO.

Which of the following items is not classified as a current asset?

Office equipment.

Chubb Company paid cash to purchase equipment on January 1, Year 1. Select the answer that shows how the recognition of depreciation expense in Year 2 would affect assets, liabilities, equity, net income, and cash flow (+ means increase, - decrease, and NA not affected). Assets Liabilities Equity Net Income Cash Flow A. + NA + − NA B. − − NA + + C. − NA − − − D. − NA − − NA

Option A

An audit is useful to financial statement users because it:

Provides reasonable assurance that the financial statements do not have material misstatements.

Monthly remittance of sales tax:

Reduces liabilities.

How does the amortization of the principal balance on an installment note payable affect the amount of interest expense recorded each succeeding year?

Reduces the amount of interest expense each year

Which of the following is not a component of the fraud triangle?

Reliance

Which internal control procedure addresses the idea that the likelihood of employee fraud or theft is reduced if collusion is required to accomplish it?

Separation of duties

Which method of depreciation is used by most U. S. companies for financial reporting purposes?

Straight-line

The term "FOB Shipping Point" means:

The buyer pays the shipping cost.

Under what condition is a pending lawsuit recognized as a liability on a company's balance sheet?

The outcome is probable and can be reasonably estimated.

Which of the following is not an advantage of accepting credit cards from retail customers?

There are fees charged for the privilege of accepting credit cards.

A five-year, $500,000 bond was issued on January 1, Year 1. The stated rate of interest was 8%, and the effective rate of interest was 10%. The interest is paid semiannually. Which of the following statements is correct?

This bond was issued at a discount, and each semiannual cash payment is $20,000.

How does the purchase of inventory on account under the perpetual inventory method affect the financial statements?

Total assets and total liabilities both increase

When do the effects of product warranties appear on the statement of cash flows?

When there is a settlement of a warranty claim made by a customer.

Nelson Company experienced the following transactions during Year 1, its first year in operation. Issued $12,000 of common stock to stockholders. Provided $4,600 of services on account. Paid $3,200 cash for operating expenses. Collected $3,800 of cash from accounts receivable. Paid a $200 cash dividend to stockholders. The amount of net cash flow from operating activities shown on Nelson Company's Year 1 statement of cash flows is

accts receivable - op exp (3800-3200) = 600

In the reconciliation of the June bank statement, a deposit made on June 30 did not appear on the June bank statement. In preparing the bank reconciliation, this deposit in transit should be:

added to the unadjusted bank balance.

Which of the following is considered a period cost?

advertising expense for the current month

A discount given to encourage prompt payment is called:

all of these answer choices are correct.

The cost of goods sold account is classified as:

an expense

Assume the perpetual inventory method is used. 1) The company purchased $12,900 of merchandise on account under terms 3/10, n/30. 2) The company returned $2,400 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $19,800 cash. What effect will the return of merchandise to the supplier have on the accounting equation?

assets and liabilities are reduced by 2400

Which of the following financial statements provides information about a company as of a specific point in time?

balance sheet

liabilities are shown on the

balance sheet

The party that issues a promissory note is known as the:

borrower and maker

In preparing the April bank reconciliation for Oscar Company, it was discovered that on April 10 a check was written to pay delivery expense of $45 but the check was erroneously recorded as $54 in the company's books. The correction the error of this error would increase:

cash and decrease delivery expense by $9.

The transaction, "provided services for cash," affects which two accounts?

cash and revenue

Which of the following items appears in the investing activities section of the statement of cash flows?

cash outflow for the purchase of land

Which resource providers lend financial resources to a business with the expectation of repayment with interest?

creditors

The year-end adjusting entry to recognize uncollectible accounts expense will:

decrease assets and decrease equity.

The recognition of depletion expense:

decreases assets and equity, and does not affect cash flow

The matching concept refers to the "matching" of:

expenses and revenues

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

financial accounting

In a company's bank reconciliation, an outstanding check is a check that:

has been issued by the company but has not been presented to the bank for payment.

expenses are shown on the

income statement

Abbott Company purchased $7,100 of merchandise inventory on account. Abbott uses the perpetual inventory method. How does this transaction affect the financial statements?

increase inventory and increase accounts payable.

The bank statement for Tetra Company contained the following items: a bank service charge of $10; a credit memo for interest earned, $15; and a $50 NSF check from a customer. The company had outstanding checks of $100 and a deposit in transit of $300. The entry to record the customer's NSF check will:

increase the Accounts Receivable balance and decrease the Cash account balance.

Which of the following would be classified as a tangible asset?

land

Bonds payable are usually classified on the balance sheet as:

long-term liabilities.

Which of the following would be considered as primarily a merchandising business?

martins supermarket

The amount of accounts receivable that is actually expected to be collected is known as the:

net realizable value.

Depreciation expense appears in the:

operating expenses section of the income statement.

On December 31, Year 1, Gaskins Co. owed $4,500 in salaries to employees who had worked during December but would be paid in January. If the year-end adjustment is properly recorded on December 31, Year 1, what will be the effect of this accrual on the following items for Gaskins? Net Income Cash Flow from Operating Activities a. No effect No effect b. Decrease No effect c. Increase Decrease d. No effect Decrease

option b

A company purchased inventory on account. If the perpetual inventory method is used, which of the following choices accurately reflects how the purchase affects the company's financial statements? Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash Flow A. + = + + NA NA − + = − NA B. +/− = NA + NA NA − NA = NA − OA C. + = + + NA NA − NA = NA NA D. + = + + NA NA − NA = NA − OA

option c

At the end of the current accounting period, Ringgold Co. recorded depreciation of $15,000 on its equipment. The effect of this entry on the company's balance sheet is to decrease:

owners' equity and decrease assets.

Which of the following correctly states the proper order of the accounting cycle?

record transactions, adjust accounts, prepare statements, close temporary accounts

Which of the following would not be considered as primarily a merchandising business?

regal cinemas

Issuing bonds payable when the market rate of interest is less than the stated interest rate:

results in bonds being issued at a premium.

The following accounts and balances were drawn from the records of Carolina Company on December 31, Year 1: Cash $ 4,000 Accounts receivable $ 3,400 Dividends $ 2,000 Common stock $ 3,900 Land $ 3,200 Revenue $ 3,200 Accounts payable $ 1,800 Expense $ 2,200 The amount of net income shown on Carolina's Year 1 income statement would amount to:

revenue -expense (3200 - 2200) = 1000

Middleton Company uses the perpetual inventory method. The company purchased an item of inventory for $120 and sold the item to a customer for $210. What effect will the sale have on the company's inventory account?

the account will decrease by 120

The reason bonds are sometimes issued at a discount is:

the stated rate of interest is lower than the rate being paid on investments in the securities market with comparable risk.

Yi Company provided services to a customer for $5,500 cash. As a result of this event:

total assets increased and net income increased

The Wilson Company purchased $34,000 of merchandise from the Poole Wholesale Company. Wilson also paid $2,700 for freight costs to have the goods shipped to its location. Which of the following statements regarding the necessary entries for the transactions is true? Wilson uses the perpetual inventory system.

total increases to the inventory account should be 36700

The credit terms, 2/15, n/30, indicate that a:

two percent discount can be deducted if the invoice is paid before the fifteenth day following the date of the sale.

The most favorable audit opinion that a company can receive is a(n):

unqualified opinion.

The balance in a revenue account at the beginning of an accounting period will always be

zero