Accounting Exam 2

Company's balance according to the general ledger: 15,000 Outstanding checks: 2,500 Bank Service charge: 15 A customer's NSF check returned by the bank: 100 What is the company's adjusted cash balance at April 30th?

$14,885

if the end-of-year supplies on hand totaled $200, and purchases totaled $300, and supplies on hand at the beginning of the year amounted to $100, how much will be reported as supplies expense for the current year?

$200

The following items were identified during the June 30 bank reconciliation: Company's balance according to the general ledger: $18,750 Outstanding checks: $3,400 Deposit in transit: $1,200 Bank service charge: $25 Credit memo for receivable collected by the bank: $500 A customer's NSF check returned by the bank: $100 What is the cash balance from the bank statement?

$21,325

Sales (credit): 2,500,000 Sales returns and allowances: 50,000 Accounts receivable (december 31): 640,000 Allowance for Doubtful Accounts (Before adjustment at December 31): 20,000 Estimated amount of uncollected accounts based on aging analysis: 45,000 refer to AT&U Company. if the company estimates its bad debts at 1% of net credit sales, what amount will be reported as bad debt expense?

$24,500

The company received a promissory note from a customer on March 1, 2019. The principal amount of the note is $20,000; the terms are 3 months and 9% annual interest. refer to the information for accent flooring. what is the total amount of interest the company will receive when the note is collected?

$450

Bank statement balance: 10,700 Unadjusted cash balance from the company's records: ? Deposit in transit: 2,100 Outstanding checks: 1,200 Bank service charges: 300 Interest earned on the bank account: 100 Customer's NSF check returned by the bank: 400 Refer to Dreammaker Kitchens. As a result of the bank reconciliation process, what is the net increase or decrease in cash which must be recorded on the company's books?

$600 decrease

Sales (credit): 2,500,000 Sales returns and allowances: 50,000 Accounts receivable (december 31): 640,000 Allowance for Doubtful Accounts (Before adjustment at December 31): 20,000 Estimated amount of uncollected accounts based on aging analysis: 45,000 if the company estimates its bad debt to be 2% of net credit sales, what will be the balance in the Allowance for Doubtful Accounts account after the adjustment for bad debts?

$69,000

a company needs to record 6 months of accrued interest on a 4-year, 12%, $12,000 promissory note payable. How much interest expense should be accrued?

$720

A 5% note receivable dated January 31 and due on December 31 of the same year will have interest due for

11 months

Cozy Corporation purchased supplies at a cost of $15,000 during the year. At January 1, supplies on hand were $5,000. At December 31, supplies on hand are $2,000. Calculate supplies expense for the year.

18,000

Each of the following items is considered a cash equivalent except:

180-day note issued by a local government

A company receiving payment of a $20,000 accounts receivable within 10 days with terms of 2/10, n/30, would record a sales discount of:

2% of $20,000

Carlock Systems receives a 6-month, 12% note for $50,000 from a customer on November 1, 2019. The note is due on April 30, 2020. Assuming the company's accounting period ends on December 31, how much interest revenue should be recognized during 2019 adn 2020?

2019: 1,000 2020: 2,000

A company has net sales of $1,000,000; gross profit of $700,000; operating income of $300,000; net income of $100,000; and average accounts receivable of $50,000. The operating margin is

30%

A customer's check for $25 that had been deposited into the company's checking account the previous month was returned stamped NSF by the bank. Which of the following journal entries is required?

Debit Accounts receivable: 25 Credit cash: 25

the purpose of closing entries is to transfer the temporary accounts to the Income Summary account. The entry to close salaries expense of $50,000 is:

Debit Income Summary 50,000 Credit salaries expense: 50,000

which of the following entries properly closes a temporary account?

Debit Income Summary: 400 Credit Salaries Expense: 400

The asset account, Supplies, has a balance of $10,000 on January 1. During January, $22,000 of supplies were purchased on account and the liability was appropriately recorded. A count of supplies at the end of January indicates a balance of $2,000. What adjusting entry is necessary at January 31?

Debit Supplies Expense: 30,000 Credit Supplies: 30,000

many companies will incur expenses in the current accounting period but now pay cash for these expenses until a later period. which of the following is the correct adjusting entry to record the $2000 payroll expense for the last week of November for Tall Manufacturing Company? The payroll will NOT be paid until the first week of December.

Debit salaries expense: 2000 credit salaries payable: 2000

Except in very small businesses, top management delegates responsibility for engaging in business activities and recording their effects in the accounting system to other managers and employees. Which of the following is NOT management's desire?

Ensure the internal control system is put in place by external auditors

Which of the following procedures is designed to safeguard cash?

Separating cash-handling activities and cash recording activities by assigning the activities to different individuals.

The College Store accepts MasterCard for payments of purchases made by students. The credit card drafts are deposited directly in a bank account. MasterCard charges a 1.55% collection fee. Credit Card drafts totaling $10,000 are deposited during August. Recording the sales and deposits will result in an increase in

Service Charge Expense for $155

To encourage prompt payment, businesses may offer a sales discount. The discount is a reduction of the normal selling price. Which of the following is NOT a reason that a seller would offer its customers a 5% cash discount?

The company is able to reduce its revenue, which reduces its taxes.

Periodically, the company should verify the petty cash balance. Which of the following equals the petty cash balance?

The sum of the receipts and the petty cash on hand

All of the following are true about debit cards EXCEPT

a debit card is not at all like a credit card

The entry to record the collection of a note at its maturity date will include which of the following?

a debit to cash

quantity discounts are...

a reduction in the selling price granted by the seller because per-unit costs are less when larger amounts are ordered.

In practice, both __________ and __________ are typically categorized as current assets on the balance sheet

accounts receivable, notes receivable

which of the following statements is NOT correct under accrual-basis accounting?

accrual-basis accounting does not tie recognition of revenues and expenses to the actual business activity

There are seven steps in the accounting cycle. which of the following is the 5th step? -journalize the transactions -post the transactions to the ledger -prepare a trial balance -adjust the accounts

adjust the accounts

which of the following is NOT true about adjusting entries?

adjusting entries are needed because companies complete all transactions within 1 period

Securitization involves all of the following EXCEPT

aging the receivables

the final portion of the worksheet is completed by transferring:

all of the balance sheet balances from the adjusted trial balance to the balance sheet columns

a trade receivable is

an amount due from a customer purchasing inventory in the ordinary course of business.

the matching principle requires that expenses

be recorded when they are incurred, regardless of when cash is paid

The stage of the operating cycle and cash management that focuses on inventory levels is

buring inventory

An unethical practice by companies that are facing sales shortfalls for the period is

channel stuffing

there are seven steps in the accounting cycle. which of the following is the 7th step? -analyze transactions -close the accounts -prepare financial statements -adjust the accounts

close the accounts

Which of the following activities is part of the operating cycle of a business?

collecting cash from customers

Internal control procedures for sales returns must be established to identify the __________ and __________ required before a sales return or a sales allowance can be recorded.

conditions, documentation

When the petty cash custodian submits receipts for replenishment of the petty cash fund, the resulting journal entry includes a

credit to cash

Urban Enterprises established a petty cash fund for $100. At the end of the month, the following receipts were presented by the petty cash custodian for reimbursement: U.S. Post Office (postage): $12 FedEx (package delivery): $36 Aqua H2O (water delivery): $48 The journal entry to record replenishment of the petty cash fund will include a

credit to cash for $96

Sales revenue is such a key component of a company's success that analysts are interested in a large number of ratios that incorporate sales. Many of these ratios attempt to measure the return the company is earning on sales. All of the following ratios are profitability ratios EXCEPT the

current ratio

If Duke Corporation bills Liberty Advisors $15,000 for product sold during the week with terms of 2/10, n30 under the net method, how much and what account will be debited in the entry to record the sale?

debit accounts receivable for $14,700

The journal entry to record a properly documented credit sale includes a

debit to accounts receivable

which of the following adjusting entries does NOT involve the cash account?

deferred revenues, deferred liabilities, accrued expenses

Operating margin is calculated by

dividing operating income by net sales

All of the following are strategic risks EXCEPT:

employees

depreciation is required for which of the following accounts? -land -equipment -accounts receivable -accounts payable

equipment

adjusting entries can have a significant impact on a company's

financial statements

more conservative adjusting entries usually lead to better predictors of:

future earnings or cash flows

Asset management refers to

how efficiently a company is using the resources at its disposal.

Cash Over and Short with a debit balance is generally reported on the

income statement as part of other expenses

after the adjusted trial balance is complete, the financial statements are prepared in a particular order. The correct order is:

income statement, statement of retained earnings, and balance sheet

The company received a promissory note from a customer on March 1, 2019. The principal amount of the note is $20,000; the terms are 3 months and 9% annual interest. refer to the information for accent flooring. at he maturity date, the customer pays the amount due for the note and interest. what entry is required on the books of accent flooring on the maturity date assuming that none of the interest had already been recognized?

increase cash by $20,450, increase interest revenue by $450, and decrease notes receivable by $20,000

which of the following items would be added to the company's cash balance on a bank reconciliation?

interest earned on the bank account

If the accounts receivable balance in the general ledger is $2,000,000 and the accounts receivable (net) reported on the balance sheet is $1,900,000 (the net realizable value), the allowance for doubtful accounts

is $100,000

depreciation of buildings and equipment is required because those assets help to produce revenue over a number of years (instead of just one period). which of the following principles requires that companies systematically assign the asset's cost as an expense in each period in which the asset is used?

matching principle

failure to record the earned portion of unearned revenue would result in which of the following?

net income being understated

The balance sheet typically reports the amount of cash and equivalents available

on the balance sheet date

there are seven steps in the accounting cycle. which of the following is the 4th step? -journalize the transactions -post the transactions to the ledger -prepare a trial balance -analyze the transactions

prepare a trial balance

There are five elements of internal control. Which of the following is NOT one of these elements?

quantifying and reporting

if investors and management want to use the financial statements, it is important for them to understand how revenue recognition and matching principles affect the amount reported on the financial statements. which of the following transactions, if recorded when cash was received, would affect the financial statements for more than 1 period?

receives cash for a service that will be performed next period

while cash-basis accounting is acceptable for many small businesses and small service organizations, it is not adequate for larger businesses. Under cash-basis accounting, which of the following statements is correct?

revenue is recorded when cash is received, regardless of when it is earned

the accounts that are used to collect the activities of only one period are considered temporary accounts. which of the following is a temporary account? -sales revenue -cash -inventory -accounts receivable

sales revenue

Cash is reported on both the balance sheet and the

statement of cash flows

the Sarbanes-Oxley Act of 2002 requires top management of publicly traded corporations to ensure the reliability of financial statements. the act requires all the following EXCEPT:

that the internal control report acknowledge that management is allowed to deny knowledge or understanding of any deceptive financial reporting

In terms of a company's accounts receivable, the "net realizable value" is

the amount of cash the company expects to collect

What do accountants mean when they say revenue can be recognized under the accrual basis of accounting?

the company's performance obligation is satisfied

The interest on a note refers to

the compensation paid to the lender for giving up the use of the resources for the period

Occasionally, accounts receivable that are written off are later partially or entirely collected.

this statement is true

Significant changes in sales revenue and sales returns and allowances should be investigated by management. This statement is

true for companies that sell products only

under accrual accounting when is revenue recognized?

when earned, and expenses when incurred

an informal schedule that is often used by accountants to assist them in organizing and preparing the information necessary to perform the end-of-period steps in the accounting cycle is called:

worksheet