acct 1-9 questions

In applying the lower of cost or market method to LIFO inventory valuation, market is defined as:

Current replacement cost.

Decisions management must make in accounting for inventory cost include all of the following except:

Customer demand for inventory.

Edison Consulting received a $300 utilities bill and immediately paid it. Edison's general journal entry to record this transaction will include a:

Debit to Utilities Expense for $300.

Extraordinary repairs:

Extend the useful life of an asset beyond its original estimate.

All of the following are employer payroll taxes except:

Federal income tax equal to that withheld from employees.

A benefit of using an accelerated depreciation method is that:

It yields larger depreciation expense in the early years of an asset's life.

A change in an accounting estimate is:

Reflected in current and future years' financial statements, not in prior statements.

FICA taxes include:

Social Security and Medicare taxes.

In order to be reported, liabilities must:

Sometimes be estimated.

The inventory valuation method that identifies each item in ending inventory with a specific purchase and invoice is the:

Specific identification method.

If assets are $300,000 and liabilities are $192,000, then equity equals:

$108,000.

The right side of a T-account is a(n):

Credit.

The adjusting entry at the end of an accounting period to record the unpaid salaries of employees for work provided is:

Debit Salaries Expense and credit Salaries Payable.

Which of the following is not true about the Allowance for Doubtful Accounts?

It is a liability account.

The materiality constraint, as applied to bad debts:

Permits the use of the direct write-off method when bad debts expenses are relatively small.

If a company is considering the purchase of a parcel of land that was acquired by the seller for $85,000, is offered for sale at $150,000, is assessed for tax purposes at $95,000, is considered by the purchaser as easily being worth $140,000, and is purchased for $137,000, the land should be recorded in the purchaser's books at:

$137,000.

Prentice Company had cash sales of $94,275, credit sales of $83,450, sales returns and allowances of $1,700, and sales discounts of $3,475. Prentice's net sales for this period equal:

$172,550.

The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both taxes are applied to the first $7,000 of an employee's pay. Assume that an employee earned total wages of $9,900. What is the amount of total unemployment taxes the employer must pay on this employee's wages?

$420.00.

On December 1, Victoria Company signed a 90-day, 6% note payable, with a face value of $15,000. What amount of interest expense is accrued at December 31 on the note? (Use 360 days a year.)

$75

Sandoval needs to determine its year-end inventory. The warehouse contains 24,000 units, of which 3,400 were damaged by flood and are not sellable. Another 2,400 units were purchased from Markor Company, FOB shipping point, and are currently in transit. The company also consigns goods and has 4,400 units at a consignee's location. How many units should Sandoval include in its year-end inventory?

27,400

If accrued salaries were recorded on December 31 with a debit to Salaries Expense and a credit to Salaries Payable, and no reversing entries were made on January 1, the entry to record payment of these wages on the following January 5 would include:

A debit to Salaries Payable and a credit to Cash.

A contingent liability is:

A potential obligation that depends on a future event arising from a past transaction or event.

Gideon Company uses the direct write-off method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. On July 10, Gideon received a check for the full amount of $2,000 from Hopkins. On July 10, the entry or entries Gideon makes to record the recovery of the bad debt is:

Accounts Receivable—A. Hopkins debit2,000 Bad debts expense credit2,000 Cash debit 2,000 Accounts Receivable—A. Hopkins credit 2,000

A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and the length of time past due is the:

Aging of accounts receivable method.

Salvage value is:

An estimate of the asset's value at the end of its benefit period.

Cash equivalents:

Are short-term, highly liquid investment assets.

Internal controls that should be applied when a business takes a physical count of inventory should include all of the following except:

Counters of inventory should be those who are responsible for the inventory.

Two common subgroups for liabilities on a classified balance sheet are:

Current liabilities and long-term liabilities.

Brinker accepts all major bank credit cards, including First Savings Bank's, which assesses a 2.5% charge on sales for using its card. On May 26, Brinker had $4,800 in First Savings Bank Card credit sales. What entry should Brinker make on May 26 to record the deposit?

Debit Cash $4,680; debit Credit Card Expense $120; credit Sales $4,800.

A company had $43 missing from petty cash that was not accounted for by petty cash receipts. The correct procedure is to:

Debit Cash Over and Short for $43.

A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. If 150,000 tons of ore are mined during the first year, the journal entry to record the depletion is:

Debit Depletion Expense $93,750; credit Accumulated Depletion $93,750.

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is:

Debit Unearned Legal Fees and credit Legal Fees Earned.

A company sold $12,000 worth of bicycles with an extended warranty. The company's experience is that warranty expense averages 2% of sales. The current period's entry to record the warranty expense is:

Debit Warranty Expense $240; credit Estimated Warranty Liability $240.

A company factored $45,000 of its accounts receivable and was charged a 4% factoring fee. The journal entry to record this transaction would include a:

Debit to Cash of $43,200, a debit to Factoring Fee Expense of $1,800, and a credit to Accounts Receivable of $45,000.

On October 12 of the current year, a company determined that a customer's account receivable was uncollectible and that the account should be written off. Assuming the direct write-off method is used to account for bad debts, what effect will this write-off have on the company's net income and total assets?

Decrease in net income; decrease in total assets.

On a trial balance, if the Debit and Credit column totals are equal, then:

Equal debits and credits have been recorded for transactions.

Two clerks sharing the same cash register is a violation of which internal control principle?

Establish responsibilities.

Internal control policies and procedures have limitations not including:

Establishing responsibilities.

Betterments are:

Expenditures making a plant asset more efficient or productive.

When a petty cash fund is in use:

Expenses paid with petty cash are recorded when the fund is replenished.

A 90-day note issued on April 10 matures on:

July 9.

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

LIFO method.

The record of all accounts and their balances used by a business is called a:

Ledger (or General Ledger).

Unearned revenues are generally:

Liabilities created when a customer pays in advance for products or services before the revenue is earned.

Generally accepted accounting principles require that the inventory of a company be reported at:

Lower of cost or market.

Sales less sales discounts, less sales returns and allowances equals:

Net sales.

Huprey is very unlikely to lose a pending lawsuit. Huprey cannot reasonably estimate the amount of damages to be paid if it loses the lawsuit.

No disclosure

Which of the following accounts could not be classified as a current liability?

Notes payable (due in 5 years).

If a company uses $1,300 of its cash to purchase supplies, the effect on the accounting equation would be:

One asset increases $1,300 and another asset decreases $1,300, causing no effect.

The primary objective of financial accounting is to:

Provide accounting information that serves external users.

The main purpose of adjusting entries is to:

Record internal transactions and events.

All of the following are considered effective cash management principles except:

Retaining excess cash for unexpected expenditures.

The rule that (1) requires revenue to be recognized when goods or services are provided to customers and (2) at the amount expected to be received from the customer is called the:

Revenue recognition principle.

Which of the following is NOT an asset account:

Services Revenue

A double-entry accounting system is an accounting system:

That records the effect of each transaction in at least two accounts with equal debits and credits.

An account balance is:

The difference between the total debits and total credits for an account including the beginning balance.

Contingent liabilities must be recorded if:

The future event is probable and the amount owed can be reasonably estimated.

The useful life of a plant asset is:

The length of time it is productively used in a company's operations.

The current period's ending inventory is:

The next period's beginning inventory.

Using the allowance method for bad debts expense, the Allowance for Doubtful Accounts is decreased:

When a specific customer account is written off.

Separate accounts receivable information for each customer is important because it reveals all of the following except:

When the customer intends to pay outstanding balances.

Goods in transit are included in a purchaser's inventory:

When the goods are shipped FOB shipping point.

All of the following are true about a corporation except:

a corporation issues bond certificates to its owners

All of the following are advantages of a corporation except:

government regulation

Each of the following are classified as a financing activity except:

purchase of long-term investments

Each of the following are classified as an operating activity except:

purchase of short-term investments

__________ stock refers to issued stock that is currently held by stockholders.

Outstanding

Preferred stock has a feature that allows it to share with common shareholders in any dividends paid in excess of the percent or dollar amount stated on the preferred stock. This feature is called:

Participating

A debit to Sales Returns and Allowances and a credit to Accounts Receivable:

Recognizes that a customer returned merchandise and/or received an allowance.

Huprey is very likely to lose a pending lawsuit. It reasonably estimates that damages paid will be $1,070,000.

Record a liability.

A machine with a cost of $100,000 and accumulated depreciation of $98,000 is sold for $70,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is _____.

$70,000

A company reported that its bonds with a par value of $40,000 and a carrying value of $52,000 are retired for $60,000 cash, resulting in a loss of $8,000. The amount to be reported under cash flows from financing activities is _____.

$(60,000)

Based solely on this information, the net cash provided (used) by financing activities on the statement of cash flows would be:

$(60,000)

A company purchased $1,900 of merchandise on July 5 with terms 3/10, n/30. On July 7, it returned $210 worth of merchandise. On July 8, it paid the full amount due. The amount of the cash paid on July 8 equals:

$1,639.

A $15 credit to Sales was posted as a $150 credit. By what amount is the Sales account in error?

$135 overstated.

On December 31 of the current year, the unadjusted trial balance of a company using the percent of receivables method to estimate bad debt included the following: Accounts Receivable, debit balance of $95,250; Allowance for Doubtful Accounts, credit balance of $921. What amount should be debited to Bad Debts Expense, assuming 6% of outstanding accounts receivable at the end of the current year are estimated to be uncollectible?

$4,794.

The net cash provided (used) by operating activities is:

$41,500

Anderson Corporation had a credit balance of $43,000 in its Retained Earnings account on December 31, 2018. Net income of $6,000 was reported on its income statement for the year ended December 31, 2019. Dividends in the amount of $5,625 were declared on December 31, 2018; the dividends are payable to the company's stockholders on February 1, 2019. The balance in its Retained Earnings account on December 31, 2019 equals _____.

$43,375

On December 31, the company's Cash account had a balance of ____.

$54,000

The credit terms 2/10, n/30 are interpreted as:

2% cash discount if the amount is paid within 10 days, or the balance due in 30 days.

At December 31, 2019, the amount of cash and cash equivalents that will be reported on the company's balance sheet is?

96,000

A corporation is:

A business legally separate from its owners.

Martinez owns machinery that cost $87,000 with accumulated depreciation of $40,000. The company sells the machinery for cash of $42,000. The journal entry to record the sale would include:

A debit to Cash of $42,000.

Unearned revenue is reported in the financial statements as:

A liability on the balance sheet.

Under the indirect method of preparing the statement of cash flows, decreases in noncash current operating assets should be:

Added to net income

Under the indirect method of preparing the statement of cash flows, depreciation and amortization should be:

Added to net income

Adjusting entries:

Affect both income statement and balance sheet accounts.

Merchandise inventory includes:

All goods owned by a company and held for sale.

If a company receives $12,000 from a stockholder, the effect on the accounting equation would be:

Assets increase $12,000 and equity increases $12,000.

If a company purchases equipment costing $4,500 on credit, the effect on the accounting equation would be:

Assets increase $4,500 and liabilities increase $4,500.

An analysis that explains differences between the checking account balance according to the depositor's records and the balance reported on the bank statement is a(n):

Bank reconciliation.

All of the following are correct forms of the accounting equation except:

Cash = Liabilities + Equity + Noncash assets

An income statement account that is used to record cash overages and cash shortages arising from petty cash transactions or from errors in making change is titled:

Cash Over and Short.

On February 1, a customer's account balance of $2,300 was deemed to be uncollectible. What entry should be recorded on February 1 to record the write-off assuming the company uses the allowance method?

Debit Allowance for Doubtful Accounts $2,300; credit Accounts Receivable $2,300.

Using the allowance method for bad debts, the end of the period adjusting entry for estimated bad debts is:

Debit Bad Debts Expense and credit Allowance for Doubtful Accounts.

Multiple-step income statements:

Contain more detail than a simple listing of revenues and expenses.

Zenith Company's Merchandise Inventory account at year-end has a balance of $91,820, but a physical count reveals that only $90,450 of inventory exists. The adjusting entry to record this $1,370 of inventory shrinkage is:

Cost of goods sold debit :1,370 Merchandise inventory credit: 1,370

The three dates related to a cash dividend include all of the following:

Date of declarationchecked Date of payment Date of record

If a company has advance subscription sales totaling $45,000 for the upcoming year, when four quarterly journals will mailed to customers, the receipt of cash would be journalized as:

Debit Cash $45,000; credit Unearned Revenue $45,000.

The closing process is necessary in order to:

Ensure that net income or net loss and dividends for the period are closed into the retained earnings account.

Which of the following procedures would weaken control over cash receipts that arrive through the mail?

For safety, only one person should open the mail, and that person should immediately deposit the cash received in the bank.

The selected inventory costing method impacts:

Gross profit and ending inventory.

The correct order of the three-step analysis of determining cash provided or used by investing activities is:

Identify changes in investing accounts, explain the changes, report the cash flow effects.

Each of the following are classifications in the statement of cash flows except:

Income

The issuance of common stock and declaration and payment of cash dividends will result in the following:

Increase in financing activities for the issuance and a decrease in financing activities for the dividends

The accrual basis of accounting:

Is generally accepted for external reporting because it is more useful than cash basis for most business decisions.

Depreciation:

Is the process of allocating the cost of a plant asset to expense.

The accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange, is the:

Measurement (Cost) principle.

Beginning inventory plus net purchases is:

Merchandise (goods) available for sale.

Alejandro Consulting paid $2,500 cash for a 5-month insurance policy that begins on March 1. Given the choices below, determine the general journal entry that Alejandro Consulting will make to record the cash payment. Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts.

Prepaid Insurance debit: 2,500 Cash credit: 2,500

All of the following are sources of information to prepare the statement of cash flows except:

Prior year's income statement

Place the steps to preparing the statement of cash flows in the correct order.

Step 1Compute net increase or decrease in cash Step 2Compute net cash from or for operating activities Step 3Compute net cash from or for investing activities Step 4Compute net cash from or for financing activities Step 5Compute net cash from all sources, then prove it

A leasehold is:

The rights granted to the lessee by the lessor of a lease.

The depreciation method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:

Units-of-production depreciation.

The inventory valuation method that tends to smooth out erratic changes in costs is:

Weighted average.

A statement of cash flows helps answer all of the following:

What explains the changes in the cash account? Where does a company spends its cash? How does a company receives its cash?

The statement of stockholders' equity _____.

describes changes in each of the major equity subcategories

If the dividend rate on preferred stock is lower than the rate the corporation earns on its assets, the effect of issuing preferred stock is to

increase the rate earned by common shareholders

The _______________ method of reporting adjusts net income to get the net cash provided or used by operating activities.

indirect

Unlike a stock dividend, a stock split _____.

reduces the par value of the stock

Each of the following are classified as a noncash investing or financing activity except:

reissuing treasury stock

An employee earned $37,000 during the year working for an employer when the maximum limit for Social Security was $128,400. The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%. The employee's annual FICA taxes amount is:

$2,830.50.

Buffet Company was organized in January 2018 and has 1,000 shares of $200 par value, 10 percent, noncumulative preferred stock outstanding and 3,000 shares of $1 par value common stock outstanding. Dividends declared and paid each year are $10,000 in 2018, $15,000 in 2019, and $75,000 in 2020. During 2020, the dividends that must be paid to the preferred and common stockholders, respectively, total _____.

$20,000 and $55,000

A company has sales of $396,600 and its gross profit is $167,100. Its cost of goods sold equals:

$229,500.

A company borrowed $10,000 by signing a 180-day promissory note at 9%. The total interest due on the maturity date is: (Use 360 days a year.)

$450

Under the indirect method of preparing the statement of cash flows, decreases in current liabilities should be:

Deducted from net income

Under the indirect method of preparing the statement of cash flows, increases in current assets should be:

Deducted from net income

It is reasonably possible that Huprey will lose a pending lawsuit. Huprey and its lawyers cannot estimate what the damages will be if it loses.

Disclose in notes.

Failure by a promissory notes' maker to pay the amount due at maturity is known as:

Dishonoring a note.

Each of the following are classified as an investing activity except:

receipt of interest revenue