ACCT 2100 (W01) - Exam Questions

On January 1, Year 2, Grande Company had a $63,400 balance in the Accounts Receivable account and a $1,300 balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $152,000 of service on account. The company collected $161,300 cash from accounts receivable. Uncollectible accounts are estimated to be 1% of sales on account. The amount of uncollectible accounts expense recognized on the Year 2 income statement is:

0.01 * 152000 = 1520

Domino Company uses the aging of accounts receivable method to estimate uncollectible accounts expense. Domino began Year 2 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $41,510 and $3,200, respectively. During the year, the company wrote off $2,490 in uncollectible accounts. In preparation for the company's Year 2 estimate, Domino prepared the following aging schedule: Number of days Receivables % Likely to be past due amount uncollectible Current $ 62,000 1% 0-30 24,900 5% 31-60 5,960 10% 61-90 2,920 25% Over 90 2,600 50% Total $ 98,380 What will Domino record as Uncollectible Accounts Expense for Year 2?

1. Multiply table: 4491 2. Subtract ADA, add write-off 4491 - 3200 + 2490 = 3781

Chico Company paid $580,000 for a basket purchase that included office furniture, a building and land. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Office furniture - $150,000; Building - $480,000, Land - $120,000. Based on this information, and rounding allocations to two decimal places, the amount of cost that would be allocated to the office furniture is closest to: (Round your intermediate percentages to 2 decimal places: ie 0.054231 = 5.42%.):

150,000 / (150,000 + 480,000 + 120,000) = 0.2 0.2 * 580000 = 116,000

Melbourne Company uses the perpetual inventory method. Melbourne purchased 1,700 units of inventory that cost $11.00 each. At a later date the company purchased an additional 1,800 units of inventory that cost $11.50 each. If Melbourne uses a LIFO cost flow method, and sells 2,000 units of inventory, the amount of ending inventory appearing on the balance sheet will be:

1700 * 11 = 18700 1800 * 11.50 = 20700 Sold 2000 using LIFO: (1800 * 11.50) + (200 * 11) = 22900 EI: (1700 - 200) * 11 = 16500

On January 1, Year 2, Grande Company had a $73,200 balance in the Accounts Receivable account and a $3,400 balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $201,000 of service on account. The company collected $246,700 cash from accounts receivable. Uncollectible accounts are estimated to be 1% of sales on account. Based on this information, the amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows is:

246700

Anton Co. uses the perpetual inventory method. Anton purchased 640 units of inventory that cost $5 each. At a later date the company purchased an additional 780 units of inventory that cost $7 each. If Anton uses the FIFO cost flow method and sells 1,000 units of inventory, the amount of cost of goods sold will be:

640 * 5 780 * 7 Sold 1000 (640 * 5) + (360 * 7) = 5720

Stosch Company's balance sheet reported assets of $97,000, liabilities of $26,000 and common stock of $23,000 as of December 31, Year 1. If Retained Earnings on the balance sheet as of December 31, Year 2, amount to $62,000 and Stosch paid a $25,000 dividend during Year 2, then the amount of net income for Year 2 was which of the following?

97000 = 26000 + 23000 + Ending RE Ending RE = 48000 Ending RE = Beg. bal. + NI - Div. 62000 = 48000 + NI - 25000 NI = 39000

Yowell Company granted a sales discount of $360 to a customer when it collected the amount due on account. Yowell uses the perpetual inventory system. Which of the following answers reflects the effects on the financial statements of only the discount?

A = (360) L = NA Equity = (360) Rev = (360) NI = (360)

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:

A = L + CS + RE 50,000 = 22,000 + 15,000 + RE RE = 13,000

The following account balances were drawn from the financial statements of Grayson Company: Cash: 6,400 Accounts receivable: 3,500 Land: 10,000 Accounts payable: 2,250 Common stock: ? Retained earnings, Jan.1: 4,700 Revenue: 11,500 Expenses: 8,250 Based on the above information, what is the balance of Common Stock for Grayson Company?

AR *IS* an asset These balances are *year-end* balances! 1. Ending Retained Earnings Ending NI + Beg. RE (11500 - 8250) + 4700 = 7950 2. A = L + CS + RE (6400 + 3500 + 10,000) = 2250 + 7950 + CS CS = 9700

Assume the perpetual inventory method is used. 1) The company purchased $13,100 of merchandise on account under terms 4/10, n/30. 2) The company returned $2,600 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 $20,200 cash. What effect will the return of merchandise to the supplier have on the accounting equation? Assets and equity are reduced by $2,600. Assets and liabilities are reduced by $2,600. None. It is an asset exchange transaction. Assets and liabilities are reduced by $2,496.

Assets and liabilities are reduced by $2,600. The purchase return will decrease assets (merchandise inventory) and decrease liabilities (accounts payable) by $2,600, the full invoiced amount of the merchandise returned.

At the end of Year 2, retained earnings for the Baker Company was $2,850. Revenue earned by the company in Year 2 was $3,100, expenses paid during the period were $1,650, and dividends paid during the period were $1,050. Based on this information alone, retained earnings at the beginning of Year 2 was:

Beg. RE Ending RE = Beg. bal. + NI - Div. 2850 = Beg. RE + NI - 1050 NI = Rev. - Exp. NI = 3100 - 1650 = 1450 2850 = Beg. RE + 1450 - 1050 Beg. RE = 2450

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

Cash and Revenue

Madison Company owned an asset that had cost $44,000. The company sold the asset on January 1, Year 4, for $16,000. Accumulated depreciation on the day of sale amounted to $32,000. Based on this information, the sale would result in: A $16,000 cash inflow in the investing activities section of the cash flow statement. A $4,000 gain in the investing activities section of the statement of cash flows. A $4,000 cash inflow in the financing activities section of the cash flow statement. A $16,000 increase in total assets.

Cash flows are only affected by the $16,000 cash received on the sale. Cash flows are not affected by the book value of the asset. The $16,000 is reported as a cash inflow from investing activities. Total assets increased by $4,000, the difference between the $16,000 cash received and the $12,000 book value of the asset sold. A $16,000 cash inflow in the investing activities section of the cash flow statement.

Which of the following items is an example of revenue? Cash received from a bank loan Cash received from investors from the sale of common stock Cash received from customers at the time services were provided Cash received from the sale of land for its original selling price

Cash received from customers at the time services were provided

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?

Cash, Inventory, Common stock (1, 2, 6)

On January 1, Year 2, the Accounts Receivable balance was $31,300 and the balance in the Allowance for Doubtful Accounts was $3,800. On January 15, Year 2, an $1,120 uncollectible account was written-off. The net realizable value of accounts receivable immediately after the write-off is:

DO NOT ACCOUNT FOR WRITE-OFF IMMEDIATELY AFTER WRITE OFF NRV = AR - ADA = 31300 - 3800 = 27500

On January 1, Year 1, Missouri Co. purchased a truck that cost $50,000. The truck had an expected useful life of 10 years and a $5,000 salvage value. The amount of depreciation expense recognized in Year 2 assuming that Missouri uses the double declining-balance method is:

Double-declining 1. Straight-line: 1/10 2. Double #1: 1/5 3. Table: Y1: (50000 - 0) * 1/5 = 10,000 Y2: (50000 - 10,000) * 1/5 = 8,000 8,000

On January 1, Year 1, Friedman Company purchased a truck that cost $55,000. The truck had an expected useful life of 8 years and an $9,000 salvage value. The book value of the truck at the end of Year 1, assuming that Friedman uses the double-declining-balance method, is: (Do not round intermediate calculations.)

Double-declining: 1. Straight-line: 1/8 2. Double #1: 1/4 3. Table: Y1: (55000 - 0) * 1/4 = 13750 Book value = 55,000 - 13750 = 41250

Glasgow Enterprises started the period with 85 units in beginning inventory that cost $2.00 each. During the period, the company purchased inventory items as follows. Glasgow sold 375 units after purchase 3 for $2.00 each. Purchase No. of Items Cost 1 350 $ 2.50 2 125 $ 2.60 3 50 $ 3.00 Glasgow's ending inventory under weighted average would be approximately: (Round your intermediate calculations to 2 decimal places.)

EI = how much is left WA cost per unit: (85 * 2) + (350 * 2.50) + (125 * 2.60) + (50 * 3) = 1520 1520 / (85 + 350 + 125 + 50 = 610) = 2.49 610 - 375 = 235 235 * 2.49 = 585.15 = ~ 585

EXAM 2

EXAM 2

Warren Enterprises had the following events during Year 1: The business issued $37,000 of common stock to its stockholders. The business purchased land for $29,000 cash. Services were provided to customers for $33,000 cash. Services were provided to customers for $22,000 on account. The company borrowed $33,000 from the bank. Operating expenses of $29,000 were incurred and paid in cash. Salary expense of $2,500 was accrued. A dividend of $21,000 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:

Ending RE = Beg. Bal. + NI - Div = Beg. Bal. + Rev - Exp - Div Rev: > 33000 > 22000 Exp: > 29000 > 2500 Ending RE = 0 + 55000 - 31500 - 21,000 = 2500

Retained Earnings at the beginning and ending of the accounting period was $1,000 and $2,100, respectively. If revenues were $3,900 and dividends paid to stockholders were $900, expenses for the period must have been

Ending RE = Beg. bal. + NI - Div. Ending RE = Beg. bal. + (Rev. - Exp.) - Div. 2100 = 1000 + (3900 - Exp.) - 900 Exp = 1900

The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $24,000; Liabilities = ?; Common Stock = $5,400; Revenue = $11,800; Dividends = $950; Beginning Retained Earnings = $3,950; Ending Retained Earnings = $7,400. Based on this information, the amount of expenses on Calloway's income statement was

Ending RE = Beg. bal. + NI - Div. 7400 = 3950 + (11800. - Exp.) - 950 Exp = 7400

Exam 1

Exam 1

Hoover Company purchased two identical inventory items. The item purchased first cost $41.50. The item purchased second cost $46.50. Then Hoover sold one of the inventory items for $65. Based on this information, the amount of: ending inventory is $46.50 if Hoover uses the LIFO cost flow method. cost of goods sold is $41.50 if Hoover uses the LIFO cost flow method. gross margin is $21.00 if Hoover uses the weighted average cost flow method. cost of goods sold is $46.50 if Hoover uses the FIFO cost flow method.

First Choice LIFO EI: 41.50 Wrong Second Choice LIFO COGS: 65 - 46.50 = 18.50 Wrong Third Choice WA GM: (41.50 + 46.50) / 2 = 44 65 - 44 = 21 CORRECT

Ballard Company uses the perpetual inventory system. The company purchased $9,400 of merchandise from Andes Company under the terms 4/10, net/30. Ballard paid for the merchandise within 10 days and also paid $390 freight to obtain the goods under terms FOB shipping point. All of the merchandise purchased was sold for $17,800 cash. The amount of gross margin for this merchandise is:

GM = Rev - COGS Rev = 17800 COGS = Inventory: 9024 + Freight: 390 = 9414 GM = 8386

Assume the perpetual inventory method is used. 1) The company purchased $13,600 of merchandise on account under terms 2/10, n/30. 2) The company returned $3,100 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 $21,200 cash. The amount of gross margin from the four transactions is:

GM = Rev - COGS Rev = 21200 COGS = 1. Origial purchase - returned goods = new 2. New - (New * discount rate) = COGS 1. 13600 - 3100 = 10500 2. 10500 - (10500 * 0.02) = 10290 GM = 21200 - 10290 = 10910

If prices are rising, which inventory cost flow method will produce the lowest amount of cost of goods sold?

Higher prices will be last in the records, so cost of goods sold will increase if you start from the bottom. That means, FIFO will produce the LOWEST COGS.

Rosewood Company made a loan of $7,600 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:

Interest revenue = principal x rate x time outstanding 7600 * 0.06 * (9/12) = 342 in December Y1 7600 * 0.06 * (3/12) = 114 in Y2

Which inventory costing method will produce an amount for cost of goods sold that is closest to current market value? LIFO. FIFO. Specific identification. Weighted average.

LIFO - because it will faithfully report the most recent costs

The inventory records for Radford Co. reflected the following Beginning inventory @ May 1 2,000 units @ $ 5.60 First purchase @ May 7 2,100 units @ $ 5.80 second purchase @ May 17 2,300 units @ $ 5.90 Third purchase @ May 23 1,900 units @ $ 6.00 Sales @ May 31 6,300 units @ $ 7.50 Determine the amount of cost of goods sold assuming the LIFO cost flow method.

LIFO COGS (1900 * 6) + (2300 * 5.90) + (2100 * 5.80) = 37,150‬

Which of the following is not considered depreciable property, plant, and equipment? Land Buildings Office furniture Computers

Land has a category of its own Land

Jantzen Company recorded employee salaries earned but not yet paid. Which of the following represents the effect of this transaction on the financial statements? A = L. + E R. - Exp. = NI CF A. + = + + NA + - NA = + -OA B. NA = + + - NA - + = - -IA C. - = NA + - NA - + = - NA D. NA = + + - NA - + = - NA

Liab = + A = + No Cash Flow Option D

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?

NI = Rev - Exp Cost of goods sold, transportation-out, selling expense, loss on the sale of land, and sales will all appear on the income statement.

Nelson Company experienced the following transactions during Year 1, its first year in operation. Issued $6,200 of common stock to stockholders. Provided $2,500 of services on account. Paid $1,650 cash for operating expenses. Collected $2,000 of cash from accounts receivable. Paid a $110 cash dividend to stockholders. The amount of net income recognized on Nelson Company's Year 1 income statement is:

NI = Rev - Exp Rev: > 2500 Exp: > 1650 2500 - 1650 = 850

Revenue on account amounted to $5,600. Cash collections of accounts receivable amounted to $3,500. Expenses for the period were $2,900. The company paid dividends of $850. Net income for the period was

NI = Rev - Exp NI = 5600 - 2900 = 2700

The Miller Company earned $97,000 of revenue on account during Year 2. There was no beginning balance in the accounts receivable and allowance accounts. During Year 2, Miller collected $69,000 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:

NRV = AR - ADA AR: beginning, sales, collections 0 + 97000 - 69000 = 28000 ADA: beginning, uncollectible expense 0 + (0.03 * 97000) = 2910 NRV = 28000 - 2910 = 25090

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $75,200 and $3,800, respectively. During the year Kincaid reported $211,000 of credit sales. Kincaid wrote off $2,050 of receivables as uncollectible in Year 2. Cash collections of receivables amounted to $264,300. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales. The net realizable value of receivables appearing on Kincaid's Year 2 balance sheet will amount to:

NRV = AR - ADA WRITE-OFF IS SUBTRACTED TWICE, ONCE IN EACH CATEGORY AR: beginning, sales, collections, write-off 75200 + 211000 - 264300 - 2050 = 19850 ADA: beginning, uncollectible expense, write-off 3800 + (0.01 * 211000 - 2050) = 3860 NRV = 19850 - 3860 = 15990

Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1) issued stock for $42,000 2) borrowed $26,000 from its bank 3) provided consulting services for $40,000 cash 4) paid back $16,000 of the bank loan 5) paid rent expense for $9,500 6) purchased equipment for $13,000 cash 7) paid $3,100 dividends to stockholders 8) paid employees' salaries of $22,000 What is Yowell's notes payable balance at the end of Year 1?

Notes payable: 26,000 - 16,000 = 10,000

Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1) issued stock for $68,000 2) borrowed $39,000 from its bank 3) provided consulting services for $66,000 cash 4) paid back $29,000 of the bank loan 5) paid rent expense for $16,000 6) purchased equipment for $26,000 cash 7) paid $4,400 dividends to stockholders 8) paid employees' salaries of $35,000 What is Yowell's net cash flow from operating activities?

OA: - services - rent expense - salaries 66000 - 16000 - 35000 = 15000

Becker's Bookstore shipped merchandise FOB destination to a customer. If the transportation costs are paid in cash, which of the following choices reflects how this transaction will affect the company's financial statements? Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash Flow A. − = NA + − NA − + = − − OA B. − = NA + − NA − + = − NA C. +/− = NA + NA + − NA = + − OA D. − = NA + − − − NA = − − OA

Option A Expense + NI - - OA

On January 1, Year 1, Anon Company paid $110,000 cash to purchase equipment. The equipment had an expected useful life of six years and an estimated salvage value of $8,000. Assuming that Anon depreciates its assets using the straight-line method of depreciation, the amount of depreciation expense appearing on the Year 4 income statement and the amount of accumulated depreciation appearing on the December 31, Year 4, balance sheet would be: Depreciation expense Accumulated depreciation A. $ 17,000 $ 17,000 B. $ 17,000 $ 68,000 C. $ 68,000 $ 17,000 D. $ 17,000 $ 51,000

Option B It's kind of obvious that accumulated depreciation would be greater than depreciation expense...about 4x greater.

On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method of accounting for uncollectible accounts. In February of Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. Which of the following answers correctly states the effect of the December 31, Year 1 adjusting entry for uncollectible accounts on the financial statements of the Loudoun Corporation? Assets = Liab. + Equity Rev. − Expenses = Net Inc. Cash Flow A. (3,375 ) = 3,375 + NA NA − NA = NA NA B. (3,375 ) = NA + (3,375 ) NA − 3,375 = (3,375 ) NA C. 3,375 = NA + 3,375 NA − (3,375 ) = 3,375 3,375 OA D. NA = NA + NA NA − NA = NA NA

Option B (see above card - same transaction!)

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 No cash involved - No cash decreas in assets - no expense recorder - no NI decrease

Which of the following choices accurately reflects how the recording of accrued salary expense affects the financial statements of a business? Assets = Liab. + Equity Rev. - Exp. = Net Inc. Cash Flow A. NA = + + - - - + = NA NA B. NA = NA + +/- NA - NA = NA NA C. NA = + + - NA - + = - NA D. + = + + NA NA - + = - -OA

Option C No impact on Cash flow Liab increases Expenses increase and NI increases

Which of the following reflects the effect of the year-end adjusting entry to record estimated uncollectible accounts expense using the allowance method? Assets = Liab. + Equity Rev. Exp. = Net Inc. Cash Flow A. − = NA + − NA − = − − OA B. NA = − + − NA + = − NA C. NA = − + − NA + = − − OA D. − = NA + − NA + = − NA

Option D Assets, RE and NI decrease Exp increases No affect on Liab or Cash Flow

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 D Everything decreases except for Liabs and Cash Flow (bad all around)

A machine with a book value of $38,000 is sold for $32,000. Which of the following answers would accurately represent the effects of the sale on the financial statements? Assets = Liab. + Equity Rev./Gain − Exp./Loss = Net Inc. Cash Flow A. 38,000 = NA + 38,000 38,000 − NA = 38,000 38,000 IA B. (6,000 ) = NA + (6,000 ) NA − 6,000 = (6,000 ) 6,000 OA C. (6,000 ) = NA + (6,000 ) NA − 6,000 = (6,000 ) 6,000 IA D. (6,000 ) = NA + (6,000 ) NA − 6,000 = (6,000 ) 32,000 IA

Option D Loss of 6000 affects Assets, Equity, and Expenses and NI The 32000 cash affects Cash Inflow as a INVESTING ACTIVITY

On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method of accounting for uncollectible accounts. In February of Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. Which of the following answers correctly states the effect of recording the collection of the reestablished receivable on April 4, Year 2? Assets = Liab. + Equity Rev. − Expenses = Net Inc. Cash Flow A. NA = NA + NA NA − NA = NA NA B. 1,050 = NA + 1,050 1,050 − NA = 1,050 1,050 OA C. 1,050 = NA + 1,050 NA − (1,050 ) = 1,050 1,050 OA D. NA = NA + NA NA − NA = NA 1,050 OA

Option D Nothing, except for cash inflow OA

On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method of accounting for uncollectible accounts. In February of Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. Which of the following answers correctly states the effect of Loudoun's recording the reestablishment of the receivable on April 4, Year 2? Assets = Liab. + Equity Rev. − Expenses = Net Inc. Cash Flow A. NA = 1,050 + (1,050 ) NA − 1,050 = (1,050 ) NA B. 1,050 = NA + 1,050 1,050 − NA = 1,050 1,050 OA C. (1,050 ) = NA + (1,050 ) NA − 1,050 = (1,050 ) NA D. NA = NA + NA NA − NA = NA NA

Option D - Nothing

Which of the following events would not require an end-of-year adjusting entry? Each of these answer choices would require an end-of-year adjustment Purchasing supplies for cash Paying for one year's rent on July 1 Providing services on account

Providing services on account Providing services on account does not require an end-of-year adjusting entry. Accounts receivable is increased when services are provided on account and is decreased when payment is received from customers. Supplies and prepaid rent both require end-of-year adjusting entries to recognize expense.

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

Rent expense: 4800 * (3/12) = 1200 Cash outflow: 4800

Kenyon Company experienced a transaction that had the following effect on the financial statements: Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash Flow - = - + NA NA − NA = NA NA Which transaction would have this effect? Return by a customer of a sale that was made on account. Return to a supplier of merchandise purchased on account. Paid for merchandise that had been purchased on account. A loss on land that was sold for cash.

Return to a supplier of merchandise purchased on account.

Which of the following accounts would not appear on a balance sheet? Unearned Revenue. Salaries Payable. Neither Service Revenue nor Unearned Revenue would appear on a balance sheet. Service Revenue.

Service Revenue. Service revenue is an income statement account. Unearned revenue, despite having the word "revenue" in its title, is a liability account that appears on the balance sheet.

On January 1, Year 1, Dinwiddie Company purchased a car that cost $45,000. The car had an expected useful life of 6 years and a $10,000 salvage value. Based on this information alone: Multiple Choice the amount of depreciation expense recognized in Year 4 would be greater if Dinwiddie depreciates the car under the straight-line method than if the double-declining-balance method is used. at the end of Year 3, the amount in accumulated depreciation account will be less if the double-declining-balance method is used than it would be if the straight-line method is used. None of these statements is true. the total amount of depreciation expense recognized over the six year useful life will be greater under the double-declining-balance method than the straight-line method.

Straight-line depreciation: (asset cost - salvage value) / useful life = dep. expense (45000 - 10000) / 6 = 5833.33... per year 5833.33... x 4 years = 23,333.33... Double-declining depreciation: NOTE: Total amount of depreciable expense is (45000 - 10000) 35000 1. 1 / useful life = 1 / 6 2. Double #1: (1/6) * 2 = 1/3 3. Table: Y1: (45000 - 0) * (1/3) = 15000 Y2: (45000 - 15000) * (1/3) = 10,000 Y3: (45000 - 25,000) * (1/3) = 6666.66..7 Y4: (45000 - 31666.66...7) * (1/3) = 4,444.44... BEWARE of "amount of depreciation expense" and "amount in accumulate depreciation account" First option is correct

Sheldon Company began Year 1 with $800 in its supplies account. During the year, the company purchased $2,300 of supplies on account. The company paid $1,700 on accounts payable by year end. At the end of Year 1, Sheldon counted $1,100 of supplies on hand. Sheldon's financial statements for Year 1 would show:

Supplies and supplies expense Supplies expense: How much the company used over the year Started with 800 + bought 2300 more - ended with 1100 = 2000 was used $1,100 of supplies on hand is the supplies asset on the balance sheet; $800 beginning balance + $2,300 of supplies purchased − $1,100 ending balance = $2,000 supplies expense

Blake Company purchased two identical inventory items. The item purchased first cost $20.00, and the item purchased second cost $21.00. Blake sold one of the items for $36.00. Which of the following statements is true? Gross margin will be higher if Blake uses LIFO than it would be if FIFO were used. Ending inventory will be lower if Blake uses weighted average than if FIFO were used. Cost of goods sold will be higher if Blake uses FIFO than if weighted average were used. The dollar amount assigned to ending inventory will be the same no matter which cost flow method is used.

Test all options till you hit the right one LIFO v. FIFO GM (Sales - COGS) LIFO GM: 36 - 21 = 15 FIFO GM: 36 - 20 = 16 FIFO > LIFO...choice 1 incorrect WA v. FIFO EI WA EI: (20 + 21) / 1 = 20.5 Remaining item costs 20.5 FIFO EI: Remaining item costs 21 WA < FIFO...choice 2 is CORRECT

Which one of the following is not an accurate description of the Allowance for Doubtful Accounts? The account is a temporary account. The account is increased by an estimate of uncollectible accounts expense. The account is a contra account. The amount of the Allowance for Doubtful Accounts decreases the net realizable value of a company's receivables.

The account is a temporary account.

Jack's Snow Removal Company received a cash advance of $9,300 on December 1, Year 1 to provide services during the months of December, January, and February. The year-end adjustment on December 31, Year 1, to recognize the partial expiration of the contract will

The year-end adjustment to recognize one month's work on the three-month contract results in a $3,100 decrease in liabilities (unearned revenue) and an increase in equity (retained earnings due to recognizing revenue). 3100 decrease in liabilities AND 3100 increase in equity

Galaxy Company sold merchandise costing $3,100 for $5,200 cash. The merchandise was later returned by the customer for a refund. If the perpetual inventory method is used, what effect will the sales return have on the accounting equation?

They lose any profit made: 5200 - 3100 = 2100 Assets go down 2100, and equity goes down 2100 The sales return will increase assets (inventory) and decrease cost of goods sold, which will increase equity, by $3,100 each. It will also decrease assets (cash) and decrease sales revenue, which will decrease equity, by $5,200 each. The net effect is a decrease in total assets and total equity of $2,100.

Middleton Company uses the perpetual inventory method. The company purchased an item of inventory for $125 and sold the item to a customer for $220. What effect will the sale have on the company's inventory account?

They lose inventory. Inventory will decrease by original purchase amount, 125. The sale will cause the inventory account to decrease by $125, the cost of the item sold.

Which of the following would be classified as a long-term operational asset? Notes receivable. Trademark. Accounts receivable. Inventory.

Trademark

On January 1, Year 1, Friedman Company purchased a truck that cost $35,000. The truck had an expected useful life of 200,000 miles over 8 years and an $7,000 salvage value. During Year 2, Friedman drove the truck 33,000 miles. The amount of depreciation expense recognized in Year 2 assuming that Friedman uses the units-of-production method is: (Do not round intermediate calculations.)

Units-of-production: [(cost - salvage) / total estimated units of production] * units of production in current year [(35000 - 7000) / 200,000] * 33000 = 4620

Stubbs Company uses the perpetual inventory method. On January 1, Year 1, Stubbs purchased 800 units of inventory that cost $6.00 each. On January 10, Year 1, the company purchased an additional 600 units of inventory that cost $4.25 each. If Stubbs uses a weighted average cost flow method and sells 1,200 units of inventory for $12.00 each, the amount of gross margin reported on the income statement will be: (Round your intermediate calculations to two decimal places.)

WA GM 800 * 6 600 * 4.25 Sold 1200 @ 12 GM = Sales - COGS Sales = 1200 * 12 = 14400 COGS: 1. Cost per unit: (800 * 6) + (600 * 4.25) / (800 + 600) = 5.25 2. 5.25 * 1200 = 6300 GM = 14400 - 6300 = 8100

The cost of goods sold account is classified as: an asset. a liability. a contra asset. an expense.

an expense

Which of the following accurately describe depreciable cost? i. The amount of cost a company intends to depreciate over the life of the asset? ii. The acquisition cost of the asset. iii. The fair market value of the asset iv. The acquisition cost of the asset less the salvage value.

i. The amount of cost a company intends to depreciate over the life of the asset? iv. The acquisition cost of the asset less the salvage value.

Anchor Company purchased a manufacturing machine with a list price of $99,000 and received a 2% cash discount on the purchase. The machine was delivered under terms FOB shipping point, and freight costs amounted to $5,000. Anchor paid $7,200 to have the machine installed and tested. Insurance costs to protect the asset from fire and theft amounted to $9,400 for the first year of operations. Based on this information, the amount of cost recorded in the asset account would be:

include: list price, discount, freight costs, installation and tested 99000 - (99000 * 0.02) + 5000 + 7200 = 109220 DO NOT INCLUDE INSURANCE

The amount of accounts receivable that is actually expected to be collected is known as the: present value of accounts receivable. net realizable value. uncollectible accounts expense. allowance for doubtful accounts.

net realizable value.

If a company's total assets increased while liabilities and common stock were unchanged, then: retained earnings were less than net income during the period. no dividends were paid during the period. revenues were greater than expenses. the company must have purchased assets with cash.

revenues were greater than expenses.

Product costs are matched against sales revenue: in the period immediately following the purchase. when the merchandise is purchased. in the period immediately following the sale. when the merchandise is sold

when the merchandise is sold Product costs are matched against sales revenue (recognized as expenses) when merchandise is sold. The expense is called cost of goods sold.