Accounting Final 241

On July 1, Mabry Company purchased $1,500 of merchandise from Connor Manufacturing, terms 2/10, n30. On July 3, Mabry returned $400 of merchandise to Connor. On July 8, how much should Mabry pay to satisfy its debt to Connor? a. $1,078 b. $1,470 c. $990 d. $1,070 e. None of the above

a. $1,078

A company's trial balance indicates the following account balances: Cash $1,000 Dividends $2,000 Accounts Receivable $10,000 Common Stock $5,000 Operating Expenses $15,000 Retained Earnings $6,000 Service Revenue $29,000 Accounts Payable $2,000 Land $14,000 The balance in the retained earnings account after the closing entry will be: a. $18,000 b. $20,000 c. $12,000 d. $14,000

a. $18,000

Assume BAL, Inc began March with 95 units of inventory that cost $18 each. During March BAL purchased and sold goods as follows: March 6 Purchased 120 units @ $16 each March 15 Sold 135 units @ $30 each March 22 Purchased 135 units @ $14 each March 30 Sold 95 units @ $29 each BAL, Inc uses the perpetual inventory method. Under the LIFO inventory method, how much is BAL's cost of goods sold for the sale on March 15th? a. $2,190 b. $2,430 c. $2,350 d. $1,280

a. $2,190 (120+95 = 215 ---> 215-135 = 80 ---> 120 @ 16 = 1920 ---> 15 @ 18 = 270 ----> 1920+270 = 2190

Water Works Pool Supply purchased inventory for $2,625. The company returned $125 of the goods to the seller. The seller offered a discount of 2/10, n/30. If Water Works pays the invoice within 10 days how much will they need to pay? a. $2,450 b. $2,400 c. $2,573 d. $2,625

a. $2,450

Your business uses the allowance method to account for uncollectible receivables. At the beginning of the year, the balance in accounts receivable was $10,000 and the balance in the allowance for doubtful accounts (AFDA) was $1,800. During the year the business had sales on account of $25,000 and wrote off a $2,000 uncollectible account. The company estimates that 7% of their accounts receivable balance won't be collectible. What is the uncollectible accounts (bad debt) expense for the year? a. $2,510 b. $2,310 c. $2,110 d. $510

a. $2,510

On 1/1/2016 a company issues a 10-year $700,000 face value bond at 98. The stated rate on the bond is 6% and the effective rate is 6.2753%. What is the amount of the interest payment and the interest expense in 2016, respectively? a. $42,000/$43,049 b. $43,927/$42,000 c. $42,000/$43,927 d. $43,049/$42,000

a. $42,000/$43,049

On January 1, 2005 the accounts receivable and the allowance for doubtful accounts carried balances of $30,000 and $500, respectively. During the year the company reported $70,000 of credit sales. There were $550 of receivables written-off as uncollectible in 2005. Cash collections of receivables amounted to $74,550. The company estimates that it will be unable to collect one percent (1%) of credit sales. The amount of bad debts expense recognized in the 2005 income statement will be: a. $700. b. $300. c. $4,550. d. $550.

a. $700 (70,000 x 1%)

The Brandt Company started the accounting period with $300 in supplies. During the period the company purchased $700 of supplies on account. At the end of the accounting period there was $200 of supplies on hand. Based on this information, the amount of supplies expense appearing on the end-of-period income statement would be a. $800 b. $700 c. $500 d. $200

a. $800 (300 + 700 - x = 200)

Riley Electronics purchased $1,600 of goods for re-sale and also paid $40 cash for freight costs to have the goods delivered. Riley was offered a 1% discount if the invoice was paid within 10 days which it was. All of this inventory was sold on account for $3,100. The net cash flow from operating activities totaled: a. $(1,624) b. $(1,476) c. $1,500 d. $(1,640)

a. ($1,624)

A company issues 40,000 shares of common stock and later in the year re-purchases 10,000 shares. How many shares are outstanding at the end of the year? a. 30,000 b. 50,000 c. 40,000 d. Can't be determined

a. 30,000

During 2017, Rouse Company loaned $900 cash to the Odyssey Company. Based on this information, which of the following is true for Rouse Company? a. Assets would not change b. Net income would be reduced c. Liabilities would increase d. Expenses would increase

a. Assets would not change (journal entry would be debit: notes receivable credit: cash ---> both are assets)

Which of the following is an example of a deferral? a. Cash collected for services to be provided at a later date b. Services provided in exchange for cash to be received at a later date c. Cash collected and revenue recognized at the same time d. Customers billed for services provided last month e. None of the above.

a. Cash collected for services to be provided at a later date

ABC Company experienced an accounting event that affected its financial statements as indicated below: Asset = Liab + Equity Rev - Exp. = Net inc. Cash Flow + n/a + + n/a + n/a Which of the following accounting events could have caused these effects on ABC's statements? a. Earned revenue on account b. Purchased equipment on account c. Recognized accrued salaries owed to employees d. Paid a bill for utilities

a. Earned revenue on account

The Retained Earnings for a large corporation is $10,000,000. This amount represents a. Earnings that have not been distributed to shareholders. b. Cash in the bank. c. The dollar amount available for dividends. d. Revenues for all past years of operations.

a. Earnings that have not been distributed to shareholders.

Which of the following causes net income to be understated? a. Failure to accrue revenue earned but not billed b. Failure to record collection of an account receivable c. Failure to record depreciation expense d. Failure to record payment of an account payable e. None of the above

a. Failure to accrue revenue earned but not billed

Which of the following is not typically recorded as an end-of-period adjustment? a. Payment for insurance coverage b. Recognition of bad debts expense c. Depreciation of equipment d. Accrual of interest expense e. None of the above (i.e., all are end-of-period adjustments)

a. Payment for insurance coverage

Martin purchased machinery on January 1, 1999 for $80,000. The machinery was expected to have a useful life of 5 years and a salvage value of $20,000. Straight line depreciation was recorded on December 31, 1999 and December 31, 2000. On December 31, 2001, Martin had the machinery appraised, and the appraisal value was determined to be $70,000. What should Martin do on December 31, 2001? a. Record depreciation expense of $12,000 b. Record depreciation expense of $16,667 c. Record depreciation expense of $18,667 d. Record no depreciation expense for 2001

a. Record depreciation expense of $12,000

The balance sheet of XYZ Company shows retained earnings of $20,000 and total liabilities of $40,000 and common stock of $10,000. Based on this information alone, you would know that: a. Since the company began, the total amount of net income exceeded total distributions by at least $20,000. b. XYZ Company has enough cash to pay off its liabilities c. Equity of the owners cannot be determined d. The company obtained most of its assets through borrowing activities

a. Since the company began, the total amount of net income exceeded total distributions by at least $20,000.

Powell Co. paid for a 6 month insurance policy on December 1 and appropriately debited Prepaid Insurance for $1,200. On December 31, Powell should a. Debit Insurance Expense for $200 b. Credit cash for $300 c. Credit Prepaid Insurance for $1,000 d. Debit Insurance Expense for $1,000

a. debit insurance expense for $200

Wessely Company issued a $20,000 face value note to the Meramec Bank on September 1, 2005. The note carried a 12% annual rate of interest and a one year term. Which of the following general journal entries would be necessary to record accrued interest on December 31, 2005? a. Interest Expense 800 Interest Payable 800 b. Interest Payable 800 Interest Expense 800 c. Interest Expense 2,400 Interest Payable 2,400 d. Interest Payable 2,400 Interest Expense 2,400

a. interest expense 800 and interest payable 800 (20,000 x 12% x 4/12)

The purchase of marketable securities classified as trading securities are an outflow of cash from what type of activity? a. Operating b. Financing c. Investing

a. operating

Which of the following items would appear on the balance sheet?a. Retained earnings b. Dividends c. Revenue d. Operating activities

a. retained earnings

Falcon Company paid cash to purchase land. As a result of this accounting event: a. Total assets were unaffected b. Total equity increased c. Total liabilities decreased d. None of the above

a. total assets were unaffected (journal entry would be to debit: land and credit: cash ---> both assets)

Which of the following is not one of the primary external financial statements? a. Trial Balance b. Balance Sheet c. Income Statement d. Statement of Cash Flows

a. trial balance

Which of the following items would not appear on the income statement? a. Unearned revenue b. Interest expense c. Gain on sale of land d. All of the items would appear on the income statement

a. unearned revenue

Riley Electronics purchased $1,600 of goods for re-sale and also paid $40 cash for freight costs to have the goods delivered. Riley was offered a 1% discount if the invoice was paid within 10 days which it was. All of this inventory was sold on account for $3,100. The amount of gross margin on the sale is: a. $1,516 b. $1,476 c. $1,500 d. $1,460

b. $1,476

Leland Industries purchased a truck for $20,000 that was estimated to have a 5-year life and $2,000 salvage value. How much of the truck's cost will be expensed over 5 years? a. $20,000 b. $18,000 c. $4,000 d. $3,600

b. $18,000

Zappy's Company borrowed $250,000 on January 1, 2015. The note carried a 4% annual interest rate and required annual payments each December 31st for 4 years of $68,873 each. The balance in the notes payable account (after the annual payment is made) on the 12/31/15 balance sheet will be: a. $250,000 b. $191,127 c. $181,127 d. $240,000

b. $191,127

On January 1, 2005 the accounts receivable and the allowance for doubtful accounts carried balances of $30,000 and $500, respectively. During the year the company reported $70,000 of credit sales. There were $550 of receivables written-off as uncollectible in 2005. Cash collections of receivables amounted to $74,550. The company estimates that it will be unable to collect one percent (1%) of credit sales. The net realizable value of receivables appearing on the 2005 balance sheet will amount to: a. $24,900. b. $24,250. c. $24,350. d. $24,300.

b. $24,250

Civic Company purchased an asset costing $20,000 on January 1, 2013 and uses straight line depreciation. The asset had an expected five year life and a $2,000 salvage value. Based on this information, the amount of depreciation expense and accumulated depreciation appearing on the 2016 financial statements would be: a. $4,000 and $12,000, respectively b. $3,600 and $14,400, respectively c. $3,600 and $10,800, respectively d. $4,000 and $16,000, respectively

b. $3,600 and $14,400, respectively

Beginning and ending Cash balances were $7,500 and $11,000, respectively. If total cash paid out during the period was $47,000, what amount of cash was received during the period? a. $43,500 b. $50,500 c. $58,000 d. $54,500

b. $50,500 (7,500 + x - 47,000 = 11,000)

On September 1, Marley Company paid $18,000 to rent office space for one year. On its financial statements prepared on December 31, Marley should report Rent Expense Prepaid Rent a. $18,000 $18,000 b. $ 6,000 $12,000 c. $0 $18,000 d. $18,000 $0

b. $6,000 $12,000

Account number Account title 1 Cash 2 Service revenue 3 Accounts Receivable 4 Salary expense 5 Dividends 6 Common Stock 7 Salaries Payable 8 Retained earnings Select the true statement (note: an answer may be true even if it does not identify all accounts that have debit balances). a. Account numbers 1, 2, and 6 normally have debit balances b. Account numbers 1, 3, and 5 normally have debit balances c. Account numbers 2, 5, and 8 normally have debit balances d. Account numbers 4, 5, and 6, normally have debit balances

b. Account numbers 1, 3, and 5 normally have debit balances

With regard to a corporation's stock, par value is a. The current market price of the stock. b. An arbitrary amount that exists to fulfill legal requirements. c. The amount at which the stock has been repurchased. d. The amount at which treasury stock can be sold.

b. An arbitrary amount that exists to fulfill legal requirements.

An expense would result in: a. An increase in equity and a decrease in a liability account b. An increase in a liability or a decrease in an asset account c. A decrease in a liability or an increase in an asset account d. An increase in one asset account and a decrease in another

b. An increase in a liability or a decrease in an asset account

50. When a company declares a cash dividend, which of the following is true? a. Owners' equity is increased. b. Liabilities are increased. c. Assets are decreased. d. Assets are increased.

b. Liabilities are increased.

When a company purchases treasury stock, which of the following statements is true? a. Treasury stock is considered to be an asset because cash is paid for the stock. b. The cost of the treasury stock reduces stockholders' equity. c. Dividends continue to be paid on the treasury stock because it is still issued. d. Since the original issuer holds treasury stock, it is no longer considered to be issued.

b. The cost of the treasury stock reduces stockholders' equity.

Bonds are sold at a premium if a. The issuing company has a better reputation than other companies in the same business. b. The market rate of interest was less than the bond rate at the time of issue. c. The market rate of interest was more than the bond rate at the time of issue. d. The company will have to pay more than the face amount to retire the bonds

b. The market rate of interest was less than the bond rate at the time of issue.

Amortization of bond discount results in a. A decrease in liabilities. b. A decrease in owners' equity. c. An increase in owners' equity. d. A decrease in the cash account.

b. a decrease in owners' equity

A copy machine cost $36,000 and now has accumulated depreciation of $34,000. If the company sells the machine for $6,000 then they will record: a. A loss of $4,000 b. A gain of $4,000 c. A gain of $6,000 d. A gain of $2,000

b. a gain of $4,000 (debit: cash 6000 and accumulated depreciation 34000 and credit: gain on sale ??? and equipment 36000 ----> make the sides balance!!)

Which of the following accounts isn't closed to retained earnings at the end of the year? a. Salaries expense b. Accumulated depreciation c. Dividends d. Service Revenue

b. accumulated depreciation

On August 1, Pearl Company paid for a year of insurance coverage. On December 31, the appropriate adjustment was made to recognize insurance expense. As a result of this adjustment, a. assets and owners' equity both will increase b. assets and owners' equity both will decrease c. assets will increase and owners' equity will decrease d. assets will decrease and owners' equity will increase

b. assets and owners' equity both will decrease

Which of the following accounts normally has a debit balance? a. Accumulated depreciation b. Depreciation expense c. Unearned revenue d. Retained earnings

b. depreciation expense

Which depreciation method produces the most depreciation expense in the first year? a. Straight-line b. Double declining balance c. Units of production d. They would all result in the same amount

b. double declining balance

Which of the following is not accomplished through the closing process? a. The balance in the Retained earnings account is updated b. Expenses are accrued c. Certain temporary account balances are reset to zero d. Revenues and expenses affect Retained earnings e. None of the above (i.e., all are accomplished through the closing process)

b. expenses are accrued

Bonds issued at a premium always have a. Interest expense equal to interest payments b. Interest expense less than interest payments c. Interest expense greater than interest payments d. None of the above

b. interest expense less than interest payments

Which interest rate on a bond determines the amount of the interest payment? a. Effective rate b. Stated rate c. Market rate d. None of the above

b. stated rate

On October 1, 2017, Peyton Company paid $1,200 for one year of office rent which begins immediately. At December 31, 2017, the financial statements should report: On the Balance sheet On the Income Statement a.) Prepaid rent, $1,200 Rent Expense, $0 b.) Prepaid rent, $900 Rent Expense, $300 c.) Prepaid rent, $300 Rent Expense, $900 d.) Prepaid rent, $0 Rent Expense, $1,200

b.) Prepaid rent, $900 Rent Expense, $300 (1200 x 3/12 = expense) (1200 x 9/12 = prepaid)

Based on the trial balance above, the amount of total assets appearing on the balance sheet would be: a. $3,100 b. $2,500 c. $1,500 d. $1,200

c. $1,500 (200+2000-1000+300)

Hallery Corporation has 15,000 shares of its 5%, $1 par, cumulative preferred stock outstanding. The company declares no dividends in 2014 but in 2015 declares a dividend of $3,100. How much of the dividend do the common stockholders receive? a. $750 b. $1,500 c. $1,600 d. $0

c. $1,600

Assume BAL, Inc began March with 95 units of inventory that cost $18 each. During March BAL purchased and sold goods as follows: March 6 Purchased 120 units @ $16 each March 15 Sold 135 units @ $30 each March 22 Purchased 135 units @ $14 each March 30 Sold 95 units @ $29 each BAL, Inc uses the perpetual inventory method. Under the FIFO inventory method, what will the balance in the inventory account be at the end of March? a. $1,920 b. $2,160 c. $1,680 d. $2,000

c. $1,680 (95+120-135+135-95 = 120 -----> 120@14 =1680

On January 1, 1998, Grabill, Inc. purchased a new machine for $60,000. Its estimated useful life is eight years with an expected salvage value of $6,000. Assuming double declining-balance depreciation, depreciation expense for 1999 is: a. $15,000 b. $10,125 c. $11,250 d. $13,500 e. None of these.

c. $11,250

KMR Company began the accounting period with a $6,000 debit balance in its accounts receivable account. During the accounting period KMR recorded revenue on account amounting to $19,000. The accounts receivable account at the end of the accounting period contained an $8,000 debit balance. Based on this information alone, the cash collected from accounts receivables during the period is a. $19,000 b. $5,000 c. $17,000 d. $8,000

c. $17,000 (6,000 +19,000 - x = 8000)

The following accounts and balances were drawn from the records of Calvin Company on December 31, 2014: Cash $800 Accounts receivable $900 Dividends $200 Common Stock $700 Land $800 Revenue $600 Accounts Payable $650 Expense $250 Total assets on the December 31, 2014 balance sheet would amount to: a. $3,100 b. $2,700 c. $2,500 d. $1,600

c. $2,500

On July 1, 2002 Bartlett Company sold some used equipment for $28,000. The equipment had been purchased several years ago for $60,000. Bartlett recorded a $6,000 gain on the sale. The accumulated depreciation on the equipment at the date of sale must have been: a. $32,000 b. $34,000 c. $38,000 d. $22,000 e. None of the above.

c. $38,000

The beginning balance in accounts receivable was $3,000. Sales on account amounted to $40,000. If the ending balance in accounts receivable was $2,000, the amount of cash collected from customers is: a. $38,000 b. $39,000 c. $41,000 d. $43,000

c. $41,000 (3000 + 40,000 - x = 2,000)

On November 1, Denton borrowed $50,000 on a 6-month, 5% note. Principal and interest will be paid at maturity. On December 31, the end of the accounting period, Denton should recognize a.$833.33 of interest expense b.$1250 of interest expense c.$416.67 of interest expense d. No interest expense

c. $416.67 of interest expense (50,000 x 5% x 2/12)

Tucker Company's balance sheet reflected assets of $12,000, liabilities of $4,000 and common stock of $3,000 as of December 31, 2014. If retained earnings on December 31, 2015 balance sheet is $8,000 and Tucker paid a $2,000 dividend during 2015, then the amount of net income for 2015 was which of the following? a. $1,000 b. $3,000 c. $5,000 d. None of the above

c. $5,000 (retained earnings + net income - dividends = ending retained earnings)

Revenue on account amounted to $2,000. Cash collections of accounts receivable amounted to $1,800. Expenses incurred on account amounted to $1,500. Cash paid on accounts payable amounted to $1,400. Net income is: a. $300 b. $400 c. $500 d. $600

c. $500

On 1/1/2016 a company issues a 10-year $700,000 face value bond at 98. The stated rate on the bond is 6% and the effective rate is 6.2753%. What is the carrying value of the bond at 12/31/17? a. $687,049 b. $683,837 c. $688,163 d. $686,000

c. $688,163 (100,000 x 0.98 = 686,000 x 6.2763)

If bonds are issued at 96.5, this means that a. A $1,000 bond sold for $96.50. b. The bond sold at a premium. c. A $1,000 bond sold for $965.00. d. The bond rate of interest is 96.5% of the market rate of interest.

c. A $1,000 bond sold for $965.00.

Accounting depreciation can best be described as a. An attempt to reflect an asset's current market value b. An attempt to reflect the deterioration of an asset over its useful life c. An attempt to systematically expense the cost of an asset over its useful life d. An attempt to reflect changes in the asset's replacement cost over its useful life

c. An attempt to systematically expense the cost of an asset over its useful life

Which inventory costing method results in the lowest net income during a period of declining inventory costs? a. LIFO b. Specific identification c. FIFO d. Weighted average

c. FIFO

Which of the following errors causes an overstatement of net income? a. Failure to accrue revenue earned but not billed b. Failure to record collection of an account receivable c. Failure to record depreciation expense d. Failure to accrue interest earned on a certificate of deposit e. None of the above

c. Failure to record depreciation expensed.

Which of the following transactions does NOT affect the total assets of Marie Corp? a. A dividend is paid b. Salary expense that had been accrued at the end of the previous year is paid. c. Payment is received by Marie from customers who are paying their account receivable balances. d. Sales are made on account by Marie

c. Payment is received by Marie from customers who are paying their account receivable balances.

On January 1, 1998 Grabill, Inc. purchased a machine for $50,000. The machine is expected to have a useful life of 7 years and a salvage value of $2,000. Which of the following statements regarding the depreciation of this asset is true? a. More depreciation expense will be recognized during the 7-year life if Grabill uses an accelerated depreciation method than if they use straight-line depreciation. b. The cost of the asset will decline more rapidly if Grabill uses an accelerated depreciation method than if they use straight-line depreciation. c. The amount of depreciation expense recognized during the 7-year life will be the same regardless of whether Grabill uses straight-line depreciation or an accelerated method. d. The machine will have no salvage value if Grabill uses an accelerated method.

c. The amount of depreciation expense recognized during the 7-year life will be the same regardless of whether Grabill uses straight-line depreciation or an accelerated method.

Assume December 31 is a Wednesday. Wages are paid every Friday, and the weekly payroll (for five days) amounts to $5,500. To record the correct amount of expense for December, the firm makes the following entry on December 31: a. Wages Expense $5,500 Wages Payable $5,500 b. Wages Payable $5,500 Wages Expense $5,500 c. Wages Expense $3,300 Wages Payable $3,300 d. Wages Expense $2,200 Wages Payable $2,200

c. Wages Expense $3,300 Wages Payable $3,300

A trial balance will not balance if a. a transaction is recorded twice b. a transaction is never recorded c. a credit is incorrectly entered as a debit d. an amount is recorded in the wrong account e. None of the above.

c. a credit is incorrectly entered as a debit

When bonds are sold by a company, the accounting entry shows a. An increase in liabilities and a decrease in owners' equity b. An increase in liabilities and an increase in owners' equity. c. An increase in assets and an increase in liabilities. d. An increase in assets and an increase in owners' equity.

c. an increase in assets and an increase in liabilities

Which of the following is not classified as a current asset? a. Cash b. Merchandise inventory c. Cost of goods sold d. Accounts receivable

c. cost of goods sold

The Perfect Picture Photography Supply Company's inventory account indicated a balance of $44,700. A physical count indicated that there was $43,300 of goods on hand. The transaction that the company will record will: a. Increase assets by $1,400 b. Increase equity by $1,400 c. Decrease equity by $1,400 d. Have no effect on total assets

c. decrease equity by $1,400 (44700 - 43300 = 1400)

On January 1, 2005 the accounts receivable and the allowance for doubtful accounts carried balances of $30,000 and $500, respectively. During the year the company reported $70,000 of credit sales. There were $550 of receivables written-off as uncollectible in 2005. Cash collections of receivables amounted to $74,550. The company estimates that it will be unable to collect one percent (1%) of credit sales. The entry required to recognize the bad debts expense for 2005 will act to: a. increase total assets and retained earnings. b. decrease total assets and increase net income. c. decrease total assets and retained earnings. d. increase total assets and decrease net income.

c. decrease total assets and retained earnings

Which account will increase by a credit to the account: a. Accounts receivable b. Prepaid insurance c. Service revenue d. Rent expense

c. service revenue

Williams Company uses the perpetual inventory method. Williams purchased 500 units of inventory that cost $4.00 each. At a later date the company purchased an additional 600 units of inventory that cost $4.50 each. If Williams uses a LIFO cost flow method, and sells 800 units of inventory, the amount of ending inventory appearing on the balance sheet will be: a. $1,450. b. $1,400. c. $1,350. d. $1,200.

d. $1,200

On May 1, 2001 Maymont Company acquired a new machine for $100,000. Its estimated useful life is five years and its estimated residual value is $10,000. Assuming straight-line depreciation is used, how much depreciation expense should be recorded on December 31, 2001? a. $18,000 b. $20,000 c. $10,500 d. $12,000 e. None of the above

d. $12,000

On December 31, 20X1 Morgan reported an Accounts receivable balance of $200,000 and an Allowance for doubtful accounts balance of $3,000. During January of 20X2, Morgan wrote off an account balance of $500. Assuming no other activity, what is the net realizable value of accounts receivable after the write-off? a. $199,500 b. $196,500 c. $200,000 d. $197,000 e. None of the above.

d. $197,000

What is the net realizable value of accounts receivable at the end of the year? a. $30,890 b. $33,000 c. $30,490 d. $30,690

d. $30,690

The Sanchez Company issued bonds with a face amount of $25,000 and a life of 5 years. If the stated rate is 4% and interest is paid annually, what would be the total amount of interest paid over the life of the bonds? a. $2,000 b. $3,000 c. $4,000 d. $5,000

d. $5,000

BC Company signed a two year contract to perform consulting services for a local manufacturer on October 1, 2014. BC received $40,000 cash as an advance payment for these services and agreed the work would begin immediately. The amount of revenue that would appear on the 2014 and 2015 income statement would be: a. $20,000/ $20,000 b. $40,000/ $0 c. $10,000/ $20,000 d. $5,000/ $20,000

d. $5,000/ $20,000 (40,000/24 = 1667/mo x months = 5000 x 12 months = 20,000)

Kennard Company uses the perpetual inventory method. On January 1, 2004 Kennard purchased 300 units of inventory that cost $1.00 each. On January 10, 2004 the company purchased an additional 400 units of inventory that cost $1.50 each. If Kennard uses a LIFO cost flow method, and sells 400 units of inventory, the amount of cost of goods sold appearing on the income statement will be: a. $450. b. $500. c. $516. d. $600.

d. $600

Zappy's Company borrowed $250,000 on January 1, 2015. The note carried a 4% annual interest rate and required annual payments each December 31st for 4 years of $68,873 each. The portion of the payment which will be applied to principal in 2016 will be: a. $68,873 b. $62,500 c. $58,873 d. $61,228

d. $61,228

A company mistakenly recorded a cash purchase of a computer as an expense instead of an asset. The cash portion of the transaction was recorded correctly. As a result of this error: a. Assets and equity will be overstated b. Assets will be understated and equity will be overstated c. Assets will be overstated and equity will be understated d. Assets and equity will be understated

d. Assets and equity will be understated

Adjusting entries are made at the end of the period because of the need to a. Adjust retained earnings for income and dividends b. Adjust the balance in cash account for the effects of all daily transactions with customers and creditors c. Prepare revenue and expense accounts for recording transactions in the next accounting period by bringing the balance to zero d. Assure that all revenues and expenses are recognized in the period in which they are earned or incurred

d. Assure that all revenues and expenses are recognized in the period in which they are earned or incurred

Toth Company borrowed a $10,000 note to the Capital Bank on August 1, 2017. The note carried a one-year term and a 12% rate of interest. The adjusting entry on Toth's books to record accrued interest expense on December 31, 2017 will act to: a. Decrease equity and increase liabilities by $1,200 b. Increase liabilities and decrease equity by $400 c. Decrease equity and increase retained earnings by $500 d. Increase liabilities and decrease equity by $500

d. Increase liabilities and decrease equity by $500 (journal entry would be debit: interest expense and credit: interest payable)

On January 1, 2005 the accounts receivable and the allowance for doubtful accounts carried balances of $30,000 and $500, respectively. During the year the company reported $70,000 of credit sales. There were $550 of receivables written-off as uncollectible in 2005. Cash collections of receivables amounted to $74,550. The company estimates that it will be unable to collect one percent (1%) of credit sales. The entry to recognize the write-off of the uncollectible accounts will act to: a. increase total assets and total equity. b. decrease total assets and total equity. c. increase total assets and decrease total equity. d. Not affect total assets or total equity.

d. Not affect total assets or total equity.

The accrual basis of accounting recognizes _______________________. a. Revenues when cash is received and expenses when cash is paid b. Revenue when earned and expenses when cash is paid c. Revenue when cash is received and expenses when incurred d. Revenues when earned and expenses when incurred

d. Revenues when earned and expenses when incurred

Debit entries act to: a. Decrease liability accounts b. Increase asset accounts c. Increase expense accounts d. All of the above

d. all of the above

Love Company earned revenue on account. This event would act to: a. Increase total assets b. Increase equity c. Increase net income d. All of the above

d. all of the above (journal entry would be debit: accounts receivable and credit: service revenue)

During 2015 Kimberly Company earned $700 of cash revenue, paid $400 of cash expenses and paid a $100 dividend to its owners. Based on this information alone: a. Total assets increased by $200 b. There was a $100 cash outflow from financing activities c. Net income amounted to $300 d. All of the above are correct

d. all of the above are correct

The Davidson Company purchased equipment costing $700. Davidson paid $400 in cash and agreed to pay the remaining amount in thirty days. As a result of this transaction: a. Total assets increased by $700 b. Liabilities increase by $300 c. Total assets increased by $300 d. b and c

d. b and c (journal entry would be debit: equipment for 700 and credit: cash for 400 and accounts payable for 300)

Which of the following accounts should not appear on a post-closing trial balance? a. Retained earnings b. Common stock c. Unearned revenue d. Depreciation expense e. Accumulated depreciation

d. depreciation expense

Which of the following is presented on a statement of changes in owners' equity? a. Assets b. Revenues c. Expenses d. Net income e. All of the above.

d. net income

On October 1, Mills paid $12,000 for a one-year insurance policy, debiting Prepaid Insurance for the full amount. If the adjusting entry is not made on December 31 (end of the accounting period), how does this omission affect the current year's financial statements? a. Prepaid insurance will be understated b. Cash will be overstated c. Net income will be understated d. Net income will be overstated e. None of the above

d. net income will be overstated

Which of the following describes the correct sequence of events?a. prepare financial statements, record journal entries, post to ledger accounts, close accounts b. post to ledger accounts, record journal entries, prepare financial statements, close accounts c. post to ledger accounts, close accounts, record journal entries, prepare financial statements d. record journal entries, post to ledger accounts, prepare financial statements, close accounts

d. record journal entries, post to ledger accounts, prepare financial statements, close accounts

An account's "normal" balance is a. The debit side b. The credit side c. The side on which decreases are recorded d. The side on which increases are recorded

d. the side on which increases are recorded

Which of the following plant assets is not depreciated? a. Equipment b. Delivery truck c. Office furniture d. Land improvements (such as sidewalks) e. All of these are depreciated.

e. all of these are depreciated

The dividend on the Cosby Company's cumulative preferred stock is $6 per share per year. In 1993 and 1994 there were 10,000 shares of preferred stock outstanding, but no dividends were declared. In 1995 the company had a profitable year and decided to pay dividends to shareholders of both preferred and common stock. If the Cosby Company had available $200,000 for dividends, how much could it pay to the common stockholders? a. $20,000 b. $140,000 c. $80,000 d. $60,000

$20,000

Strauss Company recorded a business event in these T-accounts: Cash 10,000 Notes Payable 10,000 Which of the following choices accurately reflects how this event would affect the company's financial statements? Assets = Liab. + Equity Rev- Exp. = Net inc. Cash Flow a.) + + n/a n/a + - + FA b.) + + n/a n/a n/a n/a + OA c.) + n/a + + n/a + + OA d.) + + n/a n/a n/a n/a + FA

Assets = Liab. + Equity Rev- Exp. = Net inc. Cash Flow d.) + + n/a n/a n/a n/a + FA (financing activity -notes payable)

Which of the following choices accurately reflects how the recording of accrued salary expense would affect the financial statements? Assets= Liab. + Equity Rev- Exp. = Net inc. Cash Flow a.) n/a + - - + n/a n/a b.) n/a + - n/a n/a n/a n/a c.) n/a + - n/a + - n/a d.) + + n/a n/a + - - OA

Assets= Liab. + Equity Rev- Exp. = Net inc. Cash Flow c.) n/a + - n/a + - n/a

Elroy Company purchased machinery for $24,000 on January 1, 2015. The machinery was expected to have a $4,000 salvage value and a five year useful life. Recognizing depreciation expense on December 31, 2015 will have which effect on the company's financial statements? Assets= Liab. + Equity Rev- Exp.= Net inc. Cash Flow a.) (4,000)= n/a + (4,000) n/a - 4,000 = (4,000) (4,000) OA b.) (4,000)= n/a + (4,000) n/a - 4,000 = (4,000) n/a c.) (4,800)= n/a + (4,800) n/a - 4,800 = (4,800) n/a d.) (4,000)= n/a + (4,000) n/a - 4,000 = (4,000) (24,000) IA

Assets= Liab. + Equity Rev- Exp.= Net inc. Cash Flow b.) (4,000)= n/a + (4,000) n/a - 4,000 = (4,000) n/a

Bela Company experienced an accounting event that was recorded in the company's general ledger: Cash 5,000 Service Revenue 5,000 Which of the following choices accurately reflects how this event would affect the company's financial statements? Assets= Liab. + Equity Rev- Exp.= Net inc. Cash Flow a.) + + n/a n/a + - n/a b.) + n/a n/a + n/a + + OA c.) + n/a + + n/a + + FA d.) + n/a + + n/a + + OA

Assets= Liab. + Equity Rev- Exp.= Net inc. Cash Flow d.) + n/a + + n/a + + OA