Acct. 3001 Ch.3 Computational

Gregg Corp. reported revenue of $1,450,000 in its accrual basis income statement for the year ended June 30, 2015. Additional information was as follows: Accounts receivable June 30, 2014 $400,000 Accounts receivable June 30, 2015 530,000 Uncollectible accounts written off during the fiscal year 15,000 Under the cash basis, Gregg should report revenue of a. $1,035,000. b. $1,050,000. c. $1,305,000. d. $1,335,000.

1,305,000

The income statement of Dolan Corporation for 2014 included the following items: Interest revenue $121,000 Salaries and wages expense 180,000 Insurance expense 18,200 The following balances have been excerpted from Dolan Corporation's balance sheets: December 31, 2014 December 31, 2013 Interest receivable $18,200 $15,000 Salaries and wages payable 17,800 8,400 Prepaid insurance 2,200 3,000 The cash received for interest during 2014 was a. $102,800. b. $117,800. c. $121,000. d. $124,200.

117,800

Brown Company's account balances at December 31, 2014 for Accounts Receivable and the related Allowance for Doubtful Accounts are $920,000 debit and $1,400 credit, respectively. From an aging of accounts receivable, it is estimated that $23,000 of the December 31 receivables will be uncollectible. The necessary adjusting entry would include a credit to the allowance account for a. $23,000. b. $24,400. c. $21,600. d. $1,400.

21,600

A company receives interest on a $70,000, 8%, 5-year note receivable each April 1. At December 31, 2014, the following adjusting entry was made to accrue interest receivable: Interest Receivable 4,200 Interest Revenue 4,200 Assuming that the company does use reversing entries, what entry should be made on April 1, 2015 when the annual interest payment is received? a. Cash 1,400 Interest Revenue 1,400 b. Cash 4,200 Interest Receivable 4,200 c. Cash 5,600 Interest Receivable 4,200 Interest Revenue 1,400 d. Cash 5,600 Interest Revenue 5,600

Cash 5,600 Interest Revenue 5,600

Starr Corporation loaned $450,000 to another corporation on December 1, 2014 and received a 3-month, 8% interest-bearing note with a face value of $450,000. What adjusting entry should Starr make on December 31, 2014? a. Debit Interest Receivable and credit Interest Revenue, $9,000. b. Debit Cash and credit Interest Revenue, $3,000. c. Debit Interest Receivable and credit Interest Revenue, $3,000. d. Debit Cash and credit Interest Receivable, $9,000.

Debit Interest Receivable and credit Interest Revenue, $3,000.

At the end of 2014, Drew Company made four adjusting entries for the following items: 1. Depreciation expense, $25,000. 2. Expired insurance, $2,200 (originally recorded as prepaid insurance.) 3. Interest payable, $6,000. 4. Rent receivable, $10,000. In the normal situation, to facilitate subsequent entries, the adjusting entry or entries that may be reversed is (are) a. Entry No. 3 only. b. Entry No. 4 only. c. Entry No. 3 and No. 4. d. Entry No. 2, No. 3 and No. 4.

Entry No. 3 and No. 4.

During the first year of Wilkinson Co.'s operations, all purchases were recorded as assets. Supplies in the amount of $25,800 were purchased. Actual year-end supplies amounted to $5,600. The adjusting entry for store supplies will

INCREASE EXPENSES BY 20200

105. The Supplies account had a balance at the beginning of year 3 of $8,000 (before the reversing entry). Payments for purchases of supplies during year 3 amounted to $50,000 and were recorded as expense. A physical count at the end of year 3 revealed supplies costing $11,500 were on hand. Reversing entries are used by this company. The required adjusting entry at the end of year 3 will include a debit to: a. Supplies Expense for $3,500. b. Supplies for $3,500. c. Supplies Expense for $46,500. d. Supplies for $11,500.

Supplies for 11,500

Murphy Company sublet a portion of its warehouse for five years at an annual rental of $60,000, beginning on May 1, 2014. The tenant, Sheri Charter, paid one year's rent in advance, which Murphy recorded as a credit to Unearned Rent Revenue. Murphy reports on a calendar-year basis. The adjustment on December 31, 2014 for Murphy should be a. No entry b. Unearned Rent Revenue 20,000 Rent Revenue 20,000 c. Rent Revenue 20,000 Unearned Rent Revenue 20,000 d. Unearned Rent Revenue 40,000 Revenue Revenue 40,000

Unearned Rent Revenue 40,000 ReNT Revenue 40,000

A company receives interest on a $70,000, 8%, 5-year note receivable each April 1. At December 31, 2014, the following adjusting entry was made to accrue interest receivable: Interest Receivable 4,200 Interest Revenue 4,200  Assuming that the company does not use reversing entries, what entry should be made on April 1, 2015 when the annual interest payment is received? a. Cash 1,400 Interest Revenue 1,400 b. Cash 4,200 Interest Receivable 4,200 c. Cash 5,600 Interest Receivable 4,200 Interest Revenue 1,400 d. Cash 5,600 Interest Revenue 5,600

c. Cash 5,600 Interest Receivable 4,200 Interest Revenue 1,400

Gibson Company paid $12,000 on June 1, 2014 for a two-year insurance policy and recorded the entire amount as Insurance Expense. The December 31, 2014 adjusting entry is a. debit Insurance Expense and credit Prepaid Insurance, $3,500. b. debit Insurance Expense and credit Prepaid Insurance, $8,500. c. debit Prepaid Insurance and credit Insurance Expense, $3,500 d. debit Prepaid Insurance and credit Insurance Expense, $8,500.

debit Prepaid Insurance and credit Insurance Expense, $8,500.

Panda Corporation paid cash of $60,000 on June 1, 2014 for one year's rent in advance and recorded the transaction with a debit to Prepaid Rent. The December 31, 2014 adjusting entry is a. debit Prepaid Rent and credit Rent Expense, $25,000. b. debit Prepaid Rent and credit Rent Expense, $35,000. c. debit Rent Expense and credit Prepaid Rent, $35,000. d. debit Prepaid Rent and credit Cash, $25,000.

debit Rent Expense and credit Prepaid Rent, $35,000.

Lopez Company received $14,400 on April 1, 2014 for one year's rent in advance and recorded the transaction with a credit to a nominal account. The December 31, 2014 adjusting entry is a. debit Rent Revenue and credit Unearned Rent Revenue, $3,600. b. debit Rent Revenue and credit Unearned Rent Revenue, $10,800. c. debit Unearned Rent Revenue and credit Rent Revenue, $3,600. d. debit Unearned Rent Revenue and credit Rent Revenue, $10,800.

debit Rent Revenue and credit Unearned Rent Revenue, $3,600.

Pappy Corporation received cash of $24,000 on September 1, 2014 for one year's rent in advance and recorded the transaction with a credit to Unearned Rent Revenue. The December 31, 2014 adjusting entry is a. debit Rent Revenue and credit Unearned Rent Revenue, $8,000. b. debit Rent Revenue and credit Unearned Rent Revenue, $16,000. c. debit Unearned Rent Revenue and credit Rent Revenue, $8,000. d. debit Cash and credit Unearned Rent Revenue, $16,000.

debit Unearned Rent Revenue and credit Rent Revenue, $8,000.

*103. Olsen Company paid or collected during 2014 the following items: Insurance premiums paid $ 25,800 Interest collected 62,800 Salaries paid 260,400 The following balances have been excerpted from Olsen's balance sheets: December 31, 2014 December 31, 2013 Prepaid insurance $ 2,400 $ 3,000 Interest receivable 7,400 5,800 Salaries and wages payable 24,600 21,200 The interest revenue on the income statement for 2014 was a. $49,600. b. $61,200. c. $64,400. d. $76,000.

64,400

In November and December 2014, Lane Co., a newly organized magazine publisher, received $60,000 for 1,000 three-year subscriptions at $20 per year, starting with the January 2015 issue. Lane included the entire $60,000 in its 2014 income tax return. What amount should Lane report in its 2014 income statement for subscriptions revenue? a. $0. b. $3,333. c. $20,000. d. $60,000.

0

The following information is available for Ace Company for 2014: Disbursements for purchases $1,360,000 Increase in trade accounts payable 100,000 Decrease in merchandise inventory 40,000 Cost of goods sold for 2014 was a. $1,500,000. b. $1,420,000. c. $1,300,000. d. $1,220,000.

1,500,000

Colaw Co. pays all salaried employees on a biweekly basis. Overtime pay, however, is paid in the next biweekly period. Colaw accrues salaries expense only at its December 31 year end. Data relating to salaries earned in December 2014 are as follows: Last payroll was paid on 12/26/14, for the 2-week period ended 12/26/14. Overtime pay earned in the 2-week period ended 12/26/14 was $20,000. Remaining work days in 2014 were December 29, 30, 31, on which days there was no overtime. The recurring biweekly salaries total $360,000.  Assuming a five-day workweek, Colaw should record a liability at December 31, 2014 for accrued salaries of a. $108,000. b. $128,000. c. $216,000. d. $236,000.

128000

Tolan Corp.'s trademark was licensed to Eddy Co. for royalties of 15% of sales of the trademarked items. Royalties are payable semiannually on March 15 for sales in July through December of the prior year, and on September 15 for sales in January through June of the same year. Tolan received the following royalties from Eddy: March 15 September 15 2013 $5,000 $7,500 2014 6,000 9,500 Eddy estimated that sales of the trademarked items would total $30,000 for July through December 2014. In Tolan's 2014 income statement, the royalty revenue should be a. $14,000. b. $15,500. c. $20,000. d. $20,500.

14,000

Chen Company's account balances at December 31, 2014 for Accounts Receivable and the Allowance for Doubtful Accounts are $480,000 debit and $900 credit. Sales during 2014 were $1,650,000. It is estimated that 1% of sales will be uncollectible. The adjusting entry would include a credit to the allowance account for a. $17,400. b. $16,500. c. $15,600. d. $4,800.

15,600

On June 1, 2014, Nott Corp. loaned Horn $800,000 on a 12% note, payable in five annual installments of $160,000 beginning January 2, 2015. In connection with this loan, Horn was required to deposit $5,000 in a noninterest-bearing escrow account. The amount held in escrow is to be returned to Horn after all principal and interest payments have been made. Interest on the note is payable on the first day of each month beginning July 1, 2014. Horn made timely payments through November 1, 2014. On January 2, 2015, Nott received payment of the first principal installment plus all interest due. At December 31, 2014, Nott's interest receivable on the loan to Horn should be a. $0. b. $8,000. c. $16,000. d. $24,000.

16000

The income statement of Dolan Corporation for 2014 included the following items: Interest revenue $121,000 Salaries and wages expense 180,000 Insurance expense 18,200 The following balances have been excerpted from Dolan Corporation's balance sheets: December 31, 2014 December 31, 2013 Interest receivable $18,200 $15,000 Salaries and wages payable 17,800 8,400 Prepaid insurance 2,200 3,000 The cash paid for salaries and wages during 2014 was a. $189,400. b. $170,600. c. $171,600. d. $197,800.

170,600

The income statement of Dolan Corporation for 2014 included the following items: Interest revenue $121,000 Salaries and wages expense 180,000 Insurance expense 18,200 The following balances have been excerpted from Dolan Corporation's balance sheets: December 31, 2014 December 31, 2013 Interest receivable $18,200 $15,000 Salaries and wages payable 17,800 8,400 Prepaid insurance 2,200 3,000 The cash paid for insurance premiums during 2014 was a. $16,000. b. $15,200. c. $19,000. d. $17,400.

17400

On September 1, 2014, Lowe Co. issued a note payable to National Bank in the amount of $900,000, bearing interest at 9%, and payable in three equal annual principal payments of $300,000. On this date, the bank's prime rate was 8%. The first payment for interest and principal was made on September 1, 2015. At December 31, 2015, Lowe should record accrued interest payable of a. $27,000. b. $24,000. c. $18,000. d. $16,000.

18,000

Included in Allen Corp.'s balance sheet at June 30, 2013 is a 10%, $3,000,000 note payable. The note is dated October 1, 2013 and is payable in three equal annual payments of $1,500,000 plus interest. The first interest and principal payment was made on October 1, 2014. In Allen's June 30, 2015 balance sheet, what amount should be reported as accrued interest payable for this note? a. $337,500. b. $225,000. c. $112,500. d. $75,000.

225,000

102. Olsen Company paid or collected during 2014 the following items: Insurance premiums paid $ 25,800 Interest collected 62,800 Salaries paid 260,400 The following balances have been excerpted from Olsen's balance sheets: December 31, 2014 December 31, 2013 Prepaid insurance $ 2,400 $ 3,000 Interest receivable 7,400 5,800 Salaries and wages payable 24,600 21,200 The insurance expense on the income statement for 2014 was a. $20,400. b. $25,200. c. $26,400. d. $31,200.

26,400

Olsen Company paid or collected during 2014 the following items: Insurance premiums paid $ 25,800 Interest collected 62,800 Salaries and wages paid 260,400 The following balances have been excerpted from Olsen's balance sheets: December 31, 2014 December 31, 2013 Prepaid insurance $ 2,400 $ 3,000 Interest receivable 7,400 5,800 Salaries and wages payable 24,600 21,200 Salaries and wages expense on the income statement for 2014 was a. $214,600. b. $257,000. c. $263,800. d. $306,200.

263,800

Eaton Co. sells major household appliance service contracts for cash. The service contracts are for a one-year, two-year, or three-year period. Cash receipts from contracts are credited to Unearned Service Revenue. This account had a balance of $3,800,000 at December 31, 2014 before year-end adjustment. Service contract costs are charged as incurred to the Service Contract Expense account, which had a balance of $900,000 at December 31, 2014. Service contracts still outstanding at December 31, 2014 expire as follows: During 2015 $960,000 During 2016 1,140,000 During 2017 700,000 What amount should be reported as Unearned Service Revenue in Eaton's December 31, 2014 balance sheet? a. $2,900,000. b. $2,800,000. c. $1,900,000. d. $1,000,000.

2800000

Jim Yount, M.D., keeps his accounting records on the cash basis. During 2015, Dr. Yount collected $350,000 from his patients. At December 31, 2014, Dr. Yount had accounts receivable of $40,000. At December 31, 2015, Dr. Yount had accounts receivable of $70,000 and unearned revenue of $10,000. On the accrual basis, how much was Dr. Yount's patient service revenue for 2015? a. $310,000. b. $370,000. c. $380,000. d. $390,000.

370,000

At December 31, 2014, Sue's Boutique had 1,000 gift certificates outstanding, which had been sold to customers during 2014 for $60 each. Sue's operates on a gross profit of 60% of its sales. What amount of revenue pertaining to the 1,000 outstanding gift certificates should be deferred at December 31, 2014? a. $0. b. $24,000. c. $36,000. d. $60,000.

60000

Big-Mouth Frog Corporation had revenues of $300,000, expenses of $200,000, and dividends of $45,000. When Income Summary is closed to Retained Earnings, the amount of the debit or credit to Retained Earnings is a a. debit of $55,000. b. debit of $100,000. c. credit of $55,000. d. credit of $100,000.

Credit of 100,000

Mune Company recorded journal entries for the declaration of $150,000 of dividends, the $96,000 increase in accounts receivable for services rendered, and the purchase of equipment for $63,000. What net effect do these entries have on owners' equity? a. Decrease of $213,000. b. Decrease of $117,000. c. Decrease of $54,000. d. Increase of $33,000.

Decrease of 54,000

Maso Company recorded journal entries for the issuance of common stock for $160,000, the payment of $52,000 on accounts payable, and the payment of salaries expense of $84,000. What net effect do these entries have on owners' equity? a. Increase of $160,000. b. Increase of $108,000. c. Increase of $76,000. d. Increase of $24,000.

Increase of 76,000

Compared to the accrual basis of accounting, the cash basis of accounting overstates income by the net increase during the accounting period of the Accounts Receivable Accrued Expenses Payable a. No No b. No Yes c. Yes No d. Yes Yes

No,Yes

Tate Company purchased equipment on November 1, 2014 and gave a 3-month, 9% note with a face value of $60,000. The December 31, 2014 adjusting entry is a. debit Interest Expense and credit Interest Payable, $5,400. b. debit Interest Expense and credit Interest Payable, $1,350. c. debit Interest Expense and credit Cash, $900. d. debit Interest Expense and credit Interest Payable, $900.

debit Interest Expense and credit Interest Payable, $900.

Garcia Corporation received cash of $36,000 on August 1, 2014 for one year's rent in advance and recorded the transaction with a credit to Rent Revenue. The December 31, 2014 adjusting entry is a. debit Rent Revenue and credit Unearned Rent Revenue, $15,000. b. debit Rent Revenue and credit Unearned Rent Revenue, $21,000. c. debit Unearned Rent Revenue and credit Rent Revenue, $15,000. d. debit Cash and credit Unearned Rent Revenue, $21,000.

debit Rent Revenue and credit Unearned Rent Revenue, $21,000.