Accounting 1 Tests

Wonderful company had a reported after tax income in the current year of $4,970,000. Wonderful had $1,000,000 of 5% convertible bonds outstanding during the entire year and 400,000 share of common stock outstanding for the entire year. The bonds are convertible into 100,000 shares of common stock, although none of the bondholders converted their shares during the year. Wonderful has a 40% tax rate. Calculate Wonderful's fully diluted earnings per share for the year.

10

A building with a cost of $600,000 has an estimated useful life of 30 years with ZERO salvage value. It is being depreciated straight line. At the end of the 20th year, immediatly after taking depreciation expense for the year, it is determined that the building has a remaining useful life of 15 years, with a $50,000 salvage value. Assuming that straight line depreciation will continue to be used, what will be the depreciation expense for the 21st year.

10,000

Pig company has outstanding 100,000 shares of $5 par value stock and 10,000 shares of $10 par value cumulated preferred stock (dividend rate of 4%). At the end on 2015 Pig's directors decided to pay $50,000 of dividends to stockholders. No dividends were paid in 2014. What is the amount of dividends which must be paid to preferred stockholders before the common stockholders can be paid anything

8,000

Your employer asked you to create a petty cash fund of $500 A. make the journal entry needed to establish the fund B. at the end of the month there is $25 left in the fund. there are receipts totaling $450, all are misc expenses. make the entry to replenish the fund

A. petty cash 500 cash 500 B. misc expense 450 short 25 cash 475

your favorite uncle has sent you a letter indicating that he wants to give you a special gift on your birthday. He says that he will give you $20,000 cash on that day, OR he will give you $5,000 per year for the next five years, with the first payment being made one year from today. using a discount rate of 4% calculate which of these two options is a better deal for you based strictly on the time value of money.

Annuity, 22,259

Hog company just issued 500,000 shares of common stock ($10 par value). Make the journal entry that would be made by hog company if the shares are issued at a price of $20 per share

Cash 10,000,000 Stock 5,000,000 PIC 5,000,000

on July 1 you received $36,000 for services to be performed over the next nine months

Cash 24000 Unearned Revenue 2,4000

Computer company sells personal computers to consumer buyers. It backs each computer with a 90 day warranty against defects. based on previous experience it expects warranty costs to be approximately 5% of sales. During the course of the year sales of the computers amounted to $500,000. A correct journal entry at year end to account for warranty expense for the year would include which of the following

Debit to warranty expense: $25,000

Which of the following accounts is not usually closed at the end of the fiscal year A. sales revenue B. Commission revenue C. salary expense D. interest expense E. interest payable

E

Bought office equipment. list price pf 10,000 but payed 8,000 cash

Equipment 8,000 Cash 8,000

In comparing a FIFO system to a LIFO system, which of the following is correct

LIFO saves on taxes in periods of rising prices

On Sep 1 you pre paid a on year insurance policy, paying $12,000. At that time an asset account was debited and cash was credited

Insurance exp 4,000 Prepaid insurance 4,000

your employees earn $75,000 for a five day work week, paid on Friday. the workers were paid on Friday December 27. make the adjusting entry needed on Tuesday December 31.

Salary exp 30,000 Salary payable 30,000

Paid workers salaries for the week, 4,000

Salary expense 4,000 Cash 4,000

At a time when your company has 100,000 share of common stock outstanding($20 par) a decision is made to declare a 10% stock dividend. The market price of the stock in $25 per share. Prepare the journal entry to be made on the date of declaration

Stock Div 250,000 Stock 200,000 PIC 50,000

At the beginning of the year the supplies balance was $500. During the year $10,000 of supplies were purchased. inventory shows that $1,000 of supplies are left. adjusting entries

Supply Expense 9,000 Supplies 9,000

your company makes a sale to acme company, your best customer. the stated price of the goods is $15,000, but as acme is such a good customer and is paying cash you give them a 10% discount. A correct journal entry by your company to record this sale would include which of the following

credit to sales of $13,500

how would the carrying value of bonds payable change over time for bonds issued at a discount; premium

increase; decrease

Pre paid the rent for the next 12 months, 12,000 cash

prepaid rent 12,000 cash 12,000

Colorful company owns an asset which was purchsed on January 1, Year One. the cost was $120,000, estimated salvage value of $20,000 and a 12 year useful life. Using the sum of the year's digits method, calculate the depreciation expense for Year three

12,820.51

Acme Company purchased a new truck on Jan 1, 2015. The cost of the truck included the following: List Price: $110,000. Price actually paid: $105,000 Sales Tax: 10% Delivery charge: $7,000 Set up fee: $3,000 Estimated useful life: 10 years. Salvage value: $5,000 Calculated the depreciation expense to be recorded on December 31, 2015, using the straight line method

12,500

Use the following to calculate weighted average number of shares outstanding for the year 2016 for the ACE company Jan 1: 100,000 shares outstanding May 1: 10,00 more shares are issued October 1: 30,000 more shares are issued

114,166.66

Wonderful company had a reported after tax income in the current year of $5,370,000. Wonderful had $1,000,000 of 5% convertible bonds outstanding during the entire year, and 400,000 shares of common stock outstanding for the entire year. The bonds are convertible into 50,000 shares of common stock, although none of the bondholders converted their shares during the year. Wonderful has a 40% income tax rate. Calculate wonderful's "fully diluted" EPS for the year

12

you have been instructed to calculate your company's receivable turnover ratio. The following account balances exist Cash at beginning: $50,000 Cash at end: $40,000 AR at beginning: $40,000 AR and end: $60,000 Net credit sales: $800,000 COGS: $600,000

16

Big company owns an asset which was purchased on January 1, YEAR ONE. The cost was $120,000. It is estimated to have a 10 year useful life, with a salvage value of $20,000. Using the double declining balance method, calculate the depreciation expense for year two

19,200

Walter started a new business on Jan 1. on day one Walter contributed 50,000 of his money to the business. on day two he used 20,000 to buy new office furniture. on day three he borrowed 150,000 from a bank. what is the accounting equation on day 3

200,000=150,000+50,000

Tiger company has outstanding the following: 50,000 shares of $10 par value preferred stock(dividend rate of 5%), and 500,000 shares of $5 par value common stock. The preferred shares have a market price of $15 per share and the common shares have a par value of $10 per share. There are no dividends in arrears. What would be the amount that the preferred shareholders must be paid in dividends before the common shareholders can be paid anything

25,000

At a time when your company's records show a balance of $400,000 in accounts receivable and $30,000 in the allowance account a decision is made to write off the account of one of your debtors who has been in default for more that 6 months. The amount of this debt is $5,000. What is net accounts receivable immediately after this account is written off

370,000

use the following to prepare the book side on a bank reconciliation Balance per book: 40,000 Outstanding checks: 1,500 bank service charge: 50 deposits in transit: 2,500 interest paid by bank: 25 Error in check, actual amount of 500 but check written for 600

40,075

Use the following to calculate "weighted average number of shares outstanding" for the year 2015 for the acme company: January 1, 2015: 500,000 shares outstanding June 1, 2015: 100,000 more shares are issued November 1, 2015: 50,000 shares are reacquired

550,000

Acme company uses the accrual method, started the year with 500,000 balance in the OE account. During the year the company earned accrual net income of 300,000 and the owner withdrew 125,000. at the beginning of the year the cash balance was 30,000 and at the end it was 70,000. What is the OE at the end of the year.

675,000

Your company acquired a one acre tract of land on which stands a nice office building. Your company paid $800,000 for the land and building. This was a very good deal, as a recent appraisal valued the land at $150,000 and the building at $850,000. What is the total amount at which the building should be valued on the balance sheet

680,000

hog company uses the "indirect method" to prepare the statement of cash flows. Use the following to calculate cash flow from operations: accrual net income: $700,000 increase in current assets: $20,000 increase in current liabilities: $25,000 depreciation expense: $40,000 gain on sale of land: $50,000

695,000

If gross sales are $100,000, sales discounts are $10,000, sales returns are $5,000 and COGS is $60,000, NET SALES is

85,000

A bond has a stated rate of interest of 5%, and a face value of $1,000. Interest is payable once a year, and the bond will fall due exactly 10 years from today. Assuming a market rate of interest of 7%, what is the current price of the bond

859.48

Acme company uses the indirect method to prepare the statement of cash flows. use the following to calculate cash flow. Accrual net income: 800,000 depreciation expenses: 20,000 decrease in current assets: 30,000 Increase in current liabilities: 10,000 Loss on sale of long term asset: 20,000

880,000

A bonds has a coupon rate of interest of 6% annual interest, and a face value of $1,000. Interest is payable TWICE a year and the bond will fall due exactly 5 years from today. Assuming a market interest rate on 8%, what is the current price of this bond.

918.93

The financial records of the Incompetent Company shows net income of $800,000 for 2014 and $900,000 for 2015. however it is later discovered that at the end of 2014 ending inventory was overstated by $50,000. The ending inventory at the end of 2015 was correct. What is the correct amount of net income for 2015

950,000

you are the owner of a $1,000 dollar bond which carries a coupn interest rate of 3% with the interest to be paid once a year. The next payment is cheduled to be made exactly one year form today, and the bond will fall due 4 years from today. At this moment in time the market rate of interest for bonds of this type is 4%. What is the current value of this bond.

963.7

A bond which is convertible gives to the investor the power to convert the bond into: A. common stock B. more bonds C. treasury stock D. short term promissory notes E. immediate cash

A

If a company records revenue in year A but does not record associated expenses until year B, this would violate A. Matching principle B. historical cost doctrine C. going concern doctrine D. doctrine of conservatism E. periodic assumption

A

Interest expense on bonds payable is calculated as the: A. carrying value times the market interest rate B. carrying value times the stated interest rate C. face amount times the stated rate D. face amount times the market rate

A

Which of the following correctly describes the purpose of the trial balance I. Ensures that the dollar amount of total debits and total credits are equal II. ensures that all entries have been made to the correct accounts III. ensures that assets are not overstated A. I B. II C. III D. I & II E. I,II, & III

A

Which will decrease total shareholders equity I Cash dividend II Stock dividend III Stock split A. I B. II C. III D. I&II E. I,II & III

A

For each of the following indicate where the account would appear A. balance sheet, debit B. balance sheet, credit C. income statement, debit D. income statement, credit Unearned revenue Salaries expense Accounts payable Revenue Retained earnings

A C B D D

Acme Company just issued 100,000 shares of $5 par value common stock. Make the entry that would be made in the following circumstances: A. The shares are issued at a price of $5 per share B. The shares are issued at a price of $15 per share

A) Cash 500,000 Stock 500,000 B) Cash 1,500,000 Stock 500,000 PIC 1,000,000

Bingo company's directors declared $75,000 of cash dividends payable to common shareholders. The declaration was made on May 1, and are scheduled to be paid on May 31. Prepare the journal entries for each of the following. A. The declaration date B. The payment date

A) Dividends 75,000 Dividends Pay 75,000 B) Dividends Pay 75,000 Cash 75,000

Acme Company has 200,000 share of $5 par value common stock outstanding. It has decided to repurchase some of these shares to be held as treasury stock. Make journal entries for each of the following: A. Acme buys back 20,000 shares of stock at the current market price of $25 B. Acme reissues 10,000 shares for a price of $30 per share C. Acme reissues 4,000 shares for a price of $23

A) Treasury Stock 500,000 Cash 500,000 B) Cash 300,000 Treasury stock 250,000 PIC 50,000 C) Cash 92,000 PIC 8,000 Treasury stock 100,000

Acme company is about to issue $10 million of bonds. The bonds carry a stated rate of interest of 4%, and interest is payed annually. Prepare the journal entry for the issuance of the bonds under each of the following assumptions. A. The bonds are issued at 0.98 B. The bonds are issued at 1.04

A)Cash 9,800,000 Discount 200,000 Bonds payable 10,000,000 B)Cash 10,400,000 Premium 400,000 Bonds Payable 10,000,000

On January 1, 2016 Hog Company issued $10,000,000 of bonds, with a coupon rate of 5%. Interest is payable annually. The market rate of interest at the time of the issuance in 6%, and the bonds are issued at $9,400,000. A. prepare the journal entry necessary on December 31, 2016 to record the first interest payment. B. Calculate the amount of interest expense to be recorded when the second interest payment is made on December 31, 2017

A)Interest Exp 564,000 Disc 64,000 Cash 500,000 B) 567,840

Cash: $325,000 Accounts Receivable: $500,000 Inventory: $150,000 Fixed Assets: $800,000 accounts payable: $450,000 short term notes payable: $200,000 long term notes payable: $500,000 net sales: $4,000,000 COGS: $3,000,000 net income: $300,000 Market price of stock: $40 per share outstanding common stock: 20,000 A. Current Ratio B. Gross profit ratio C. earnings per share D. price/earnings ratio E. average days in inventory F. accounts receivable turnover ratio

A. 1,5 B. 25% C. 15 D. 2.667 E. 18.3 F. 8

Cash: 50,000 Accounts receivable: 400,000 Inventory: 200,000 Fixed assets: 500,000 Accounts payable: 250,000 Short term notes payable: 150,000 Long term liabilities: 350,000 Net sales: 3,000,000 COGS: 2,000,000 Net income: 250,000 Market price of stock at year end: 50 # of outstanding share of common stock: 25,000 A. Current Ratio B. Inventory turnover C. gross profit ratio D. earnings per share E. Price/earnings ratio F. Accounts receivable turnover

A. 1.625 B. 10 C. 33% D. 10 E. 5 F. 7.5

use the following information for the next two questions. Inventory records for the month of January for your company are presented below, as are the sales for the month: Date Acquired # purchased Cost per unit Beginning inv. 100 $17 Jan 10 200 $18 Jan 20 300 $19 Jan 28 400 $20 Date of sales and number of units sold on those dates: Jan 5: 50 units Jan 22: 225 units Jan 30: 350 units Total: 625 units A. calculate COGS for the month using FIFO, periodic B. calculate COGS for the month using LIFO, perpetual

A. 11,500 B. 12,125

Calculate each of the following independent questions: A. A bond has a stated rate of annual interest of 8%, and a face value of $1,000. Interest is payable twice a year, and the bond will fall due in 10 years. Assuming a market rate of interest of 6%, what is the current price of this bond? B. On Jan 1, 2017 Tropical company borrows $50,000 from safe bank. Tropical agreed to a 5% five year note. Loan payments of $900 are due at the end of each month, with the first installment due on Jan 31, 2017. What is the journal entry that must be made by tropical company on Jan 31 when the first installment is paid.

A. 1148.80 B. Interest exp 208.33 Notes payable 691.67 cash 900

use the following information for the next two questions: your company makes all of its sales on credit and uses the allowance method to account for bad debts. At year end the following account balances exist: Accounts recievable: $800,000 Allowance for bad debts: $10,000 Net sales for the year: $1,000,000 A. Assume your company uses the balance sheet method. bad debts are estimated at 10% of accounts receivable. what amount of bad debt expense will be recorded at year end. B. assume that your company uses the income statement method. bad debts are estimated at 4% of net credit sales. what amount of bad debt expense will be recorded at year end

A. 70,000 B. 60,000

Razorback company uses the periodic system. make journal entries for the following. A. (july 1)made a sale to acme company in the amount of $5,000, terms 2/10 n/30 B. Acme returned $500 of goods for credit. Razorback company made the necessary entry to record this return C. (july 7)razorback company received a check from acme for the outstanding balance legally owed by acme

A. Accounts Receivable 5,000 Sales 5,000 B. Sales returns 500 Accounts receivable 500 C. Cash 4,410 Sales Disc 90 Accounts receivable 5,000

A truck, which was acquired for $100,000, has accumulated depreciation of $40,000. Make journal entries for each of the following A. It is sold for $50,000 cash B. It is traded in for a new truck. The truck has a stated price of $140,000 but the seller gave us $50,000 credit for the trade in of the old truck, so that we only had to pay $90,000 plus the old truck

A. Accum Dep 40,000 Cash 50,000 Loss 10,000 Truck 100,000 B. New Truck 140,000 Loss 10,000 Accum Dep 40,000 Cash 90,000 Truck 100,000

make journal entries for each of the following independent transaction A. your company uses the allowance method and is recording bad debt expense for the year on December 31, 20xx. The amount of bad debt expense to be recorded is $25,000 B. your company, which uses the allowance method, has decided to write off the account of David Deadbeat. the balance of the defaulted account is $10,000 C. two months after writing off DD's account your company unexpectedly receives a check from David in the amount of $10,000. A note attached to the check reads "won the lottery". Make the journal entry to be made upon receipt of the check.

A. Bad debt expense 25,000 Allowance 25,000 B. Allowance 10,000 AR 10,000 C. AR 10,000 Allowance 10,000 Cash 10,000 AR 10,000

Two competing toy stores provide similar services, but record sales tax using different methods. Prepare the correct journal entry for each store A. Store number one records sales and sales tax in separate accounts. For the month of june cash sales were $20,000 and sales tax was $2,000 B. Store number two records sales and sales tax together. For the month of June cash sales were $25,000, which included a 5% sales tax

A. Cash 22,000 Sales 20,000 Sales tax pay 2,000 B. Cash 25,000 Sales 23,810 Sales tax pay 1,190

Huge company is issuig $4 million of bonds. Prepare journal entries for the issuance of the bonds, based on the following independent facts: A. The bonds are issued at 1.04 B. The bonds are issued at .97

A. Cash 4,160,000 Bond Pay 4,000,000 Premium 160,000 B. Cash 3,880,000 Disc 120,000 Bond Pay 4,000,000

On october 1, 2015 your company borrowed $500,000 from a local bank in order to have cash on hand for normal operations. The promissory note signed by your company stated that both principal and interest would be due on October 1, 2016. The annual interest rate was 8%. Prepare the journal entry that your company would make for each of the following: A. October 1, 2015(date the loan was made) B. December 31, 2015: the required adjusting entry C. October 1, 2016: the date that the note(plus interest) is paid

A. Cash 500,000 NP 500,000 B. Int Exp 10,000 Int Pay 10,000 C. NP 500,000 Int Pay 10,000 Int Exp 30,000 Cash 540,000

Your company is in the process of declaring and paying dividends to the common shareholders. Make the journal entries indicated below: A. June 1, 2015: at a time when there are 100,000 shares of common stock outstanding ($20 par value) your company declares a cash dividend of $2 per share, to be paid 30 days from the date of declaration B. July 1, 2015: make the journal entry to be made by your company when the dividends (declared in A, above) are paid to the shareholders C. November 1, 2015: at a time when your company still has 100,000 shares of common stock outstanding ($20 par) a decision is made to declare a 10% stock dividend. The market price of the stock is $30 per share. Prepare the journal entry to be made on the date of declaration

A. Dividends 200,000 Dividends pay 200,000 B. Dividend pay 200,000 Cash 200,000 C. Stock Div 300,000 Stock 200,000 PIC 100,000

On January 1, 2015 Razorback Company issued $10,000,000 of bonds with a coupon rate of 6%. Interest is payable once a year. The market rate of interest is 7% and the bonds are issued at $9,700,000 A. Prepare the journal entry necessary on December 31, 2015 to record the first interest payment B. Calculate the amount of interest expense to be recorded when the second interest payment is made on December 31, 2016

A. Interest Exp 679,000 Disc 79,000 Cash 600,000 B. 684,530

hog company uses the perpetual system to account for sales. Make journal entries for the following A. (june 1)purchased $10,000 of goods to be resold. the goods were purchased on open account, terms 2/10, n/30 B. (june 5)made a $4,000 cash sale to a customer. the cost of the goods which were sold was $3,000

A. Inventory 10,000 AP 10,000 B. Cash 4,000 Sales 4,000 COGS 3,000 Inventory 3,000

*need answers*Acme company pays its workers every Friday. The following is known Gross amount of weekly salaries: $100,000 Total amount withheld for federal tax: $20,000 Total amount withheld for state income tax: $5,000 Amount withheld employee's proportion of FICA: $7,000 FICA tax paid by employer : as required by law FUTA: $1,000 SUTA: $500 A. Prepare the salary expense journal entry that would be made by acme every friday B. Prepare the payroll tax expense journal entry that would be made by acme every friday

A. Salary Exp 100,000 Fed tax pay 20,000 State tax pay 5,000 FICA pay 1,000 Cash 74,000 B. Payroll

Dixie company's articles of incorperation authorizes 150,000 shares of common stock, but only 100,000 shares have actually been issued. All of the shares that have been issued have a par value of $5 per share, and were intially issued at a price of $10 pe share. Make the journal entry for each of the following: A. June 1: Dixie buys back 10,000 shares of stock at the current market price of $20 B. Dixie reissues 5,000 shares for a price of $22 per share C. Dixie reissues another 5,000 shares for a price of $19 per share

A. Treasury stock 200,000 ($20 new par) Cash 200,000 B. Cash 110,000 T stock 100,000 PIC 10,000 C. Cash 95,000 PIC 5,000 T Stock 100,000

Performed a service and billed a customer 5,000 to be paid in 30 days

Accounts receivable 5,000 Revenue 5,000

A capital lease appears on a company's financial statements in what way: A. income statement as cost of goods sold B. balance sheet as a leased asset C. income statement as an unusual cost D. balance sheet as a lease payable E. balance sheet as a leased asset

B

Assume a company buys back its own stock for $20 a share, and three months later sells it for $15 a share. If there is a 0 balance in the PIC account , a correct journal entry would include which of the following: A. debit to PIC B. debit to retained earnings C. credit to PIC D. credit to retained earnings E. debit to loss on treasury sales

B

Comparing changes in net income for one company over time A. vertical analysis B. horizontal analysis C. diagnal analysis D. future forecasting E. use of the historical model

B

The cash interest payment each period for a bond is calculated as the: A. Face amount times the market interest rate B. face amount times the states interest rate C. carrying value times the market interest rate D. Carrying value times the stated interest rate

B

The purchase of new office equipment for cash would appear in which section of the statement of cash flows A. Operating B. Investing C. financing D. Miscellaneous E. None of the above

B

Which of the following correctly describes working capital A. total assets - total liabilities B. current assets - current liabilities C. total assets - total equity D. current assets - total liabilities E. total assets - stockholders equity

B

the transfer of account balances from the journal to the individual ledger accounts is known as: A. closing entries B. posting C. preparing the trial balance D. making adjusting entries E.changing from cash to accrual accounting

B

The replacement of a major component increased the productive capacity of equipment from 10 units per hour to 20 units per hour. The expenditures for the replacement component should be accounted for as

Capitalized (added to the cost of the equipment)

Company makes sale via credit card. the card company charges 2% of the sale as a service charge. customer made a purchase of 200

Cash 196 service exp 4 revenue 200

Hog company has decided to retire its outstanding bonds on March 1, 20XX. On that date the carrying value of the bonds is $950,000 and it will cost Hog company $975,000 to retire the bonds. Record the retirement of the bonds on March 1, 20XX

Bond Pay 950,000 Loss 25,000 Cash 975,000

Splash company has decoded to retire its outstanding bonds on July 1,2017. On that date the carrying value of the bonds is $670,000 and it will cost Splash $720,000 to retire the bonds. Record the retirement of the bonds on july 1,2017.

Bonds Payable 670,000 Loss 50,000 Cash 720,000

Company pays in shareholder dividends in th amount of $500,000. in the statement of cash flows this would be reported in which section. A. operating B. investing C. financing D. miscellaneous E. None of the above

C

Treasury stock is accounted for in the financial statements as follows: A. income statement, debit balance B. income statement, credit balance C. balance sheet, debit balance D. balance sheet, credit balance

C

Which of the following has as its primary purpose to establish and improve the standards of financial accounting A. IASB B. SEC C. FASB D. AICPA E. PCAOB

C

Which pf the following is presented in the investing section of the statement of cash flows using the indirect method: A. decrease in current assets B. increase in current liabilities C. sake of used office equipment for cash D. borrowing 500,000 from a local bank and signing a long term promissory note E. paying dividends to stockholders

C

a business using the accrual system has properly accounted for $400,000 of salary expense during the year. the balance in the salaries payable account was $50,000 ant the beginning and $40,000 at the end. How much cash was paid for salaries A. 390,000 B. 400,000 C. 410,000 D. 440,000 E. 450,000

C

the accounts payable account has a beginning balance of $15,000 and the company purchased $50,000 of supplies on account. The end balance of AP was $5,000. How much did the company pay to creditors during the month A. 50,000 B. 55,000 C. 60,000 D. 65,000 E. cannot determine

C

use the follwing to find net income Revenue: 120,000 liabilities: 35,000 expenses: 80,000 assets: 50,000 dividends: 10,000 A. 15,000 B. 30,000 C. 40,000 D. 50,000 E. 120,000

C

your company has 10 employees. in the interest of time and efficiency the same person who writes the checks also has the job of reconciling the bank statement. This is generally considered to be a violation of which of the following forms of internal control: A. proper authorization B. physical controls C. separation of duties D. inadequate training E. none of the above

C

borrowed 25,000 from the bank, agreeing to pay the loan in 6 months at 6% interest

Cash 25,000 Notes Payable 25,000

Make the journal entry that will write down the cost of your company's inventory under the Lower of Cost or Market rule based on the following: the cost of the inventory is $120,000 and the market value of the inventory is $100,000

COGS 20,000 Inventory 20,000

Received full payment from a customer who made a purchase on account(5,000)

Cash 5,000 AR 5,000

Received 9,000 from a customer for services to be performed over the next 3 months

Cash 9,000 Unearned revenue 9,000

Which of the following would not affect OE A. made a sale on credit B. incurred salary expense to paid later C. you withdrew money from the company D. bought new office equipment for cash E. recorded an adjusting entry for interest expense

D

tiger company has been using the direct method to prepare cash flows, but has decided to switch to the indirect method. which is correct. A. switching will save on taxes B. switching will generate a higher net income in periods of rising prices C. cash flows from operations will decrease in a switch to the indirect method D. total cash flows will be the same in both methods E. the direct method is the Only method that is acceptable under GAAP

D

Which of the following is presented in the financing section of the statement of cash flows using the indirect method: A. paying salaries of executives B. paying the rent for the office space C. paying cash for inventory D. paying cash for new office equipment E. paying cash dividends to shareholders

E

Wonderful company borrows $100,000 from a bank, signing a promissory note. What effect does this transaction have on the accounting equation A. assets increase and OE increases B. assets increase and liabilities decrease C. assets decrease and liabilities increase D. liabilities increase and OE decreases E. assets increase and liabilities increase

E

Your firm decides to change from using the direct method for the statement of cash flows to using the indirect method. Which is correct A. in periods of rising prices switching to the indirect method will result in lower total cash flo from operations B. in periods of rising prices switching to the indirect method result in a higher total cash flow from operations C. switching to the indirect method will result in a higher cash flow from investing D. switching to the indirect method will result in a lower cash flow from investing E. switching to the indirect method will result in no change in total cash flow from operations

E

In which of the following circumstances would a company normally be permitted to record goodwill on the company's financial statements I. The company purchases another company and pays more than the fair value of the assets II. The company successfully obtains a patent which will greatly increase company sales III. The company wins a major lawsuit that will save it millions of dollars

I

Ajax company's management is trying to determine whether or not they are required to recognize an ongoing lawsuit as a contingent liability. Under GAAP which of the following is a required component of a contingent liability I. The loss is probable II. The amount of the loss can be reasonably estimated III. The amount of the loss will impair the company's ability to continue normal operations

I and II

for a manufacturing firm, work in process includes which of the following: I. Raw materials II. share of the overhead III. Salary of the company CEO

I and II

Which of the following correctly states a purpose of recording depreciation expense I. To establish a fund to enable the company to purchase new equipment when the old equipment is no longer useful II. To allocate the cost of an asset over the useful life of the asset III. To ensure that the book value of the asset is at all times equal to the fair value of the asset

II

when an auditor completes its audit and issues and unqualified opinion it is stating that: A. the company is on sound financial footing B. the company is an excellent investment for prudent investors C. the company's net income can be expected to rise in the coming years D. the company's financial statements have been prepared consistent with GAAP E. the firm has prepared the financial statements with all due diligence

d