ACCT 1 Final Practice

A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $15,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $375. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense? (See image for answer)

Explination: Desired balance in allowance account:$15,750credit Current balance: 375debit Required: adjustment to allowance$16,125credit

Fragment Company is a wholesaler that sells merchandise in large quantities. Its catalog indicates a list price of $300 per unit on a particular product and a 40% trade discount is offered for quantity purchases of 50 units or more. The cost of shipping the merchandise is $7 per unit under terms FOB shipping point. If a customer purchases 100 units of this product, what is the amount of sales revenue that Fragment will record from this sale? a. $18,000 b. $30,000 c. $18,700 d. $29,300 e. $30,700

a. $18,000 Trade discount = $300 * 40% = $120 Total sales price per unit = $300 - $120 = $180 Total sales = $180 * 100 units = $18,000

On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $37,258. What amount of interest expense will be included in the first annual payment? a. $20,000 b. $37,258 c. $25,000 d. $17,258 e. $232,742

a. $20,000 $250,000 principal * 8% = $20,000 interest

Bonds that have interest coupons attached to their certificates, which the bondholders present to a bank or broker for collection, are called: a. Coupon bonds. b. Callable bonds. c. Serial bonds. d. Convertible bonds. e. Registered bonds.

a. Coupon bonds.

The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts, such as receipts from customers, and subtracts the major items of operating cash disbursements, such as cash paid for merchandise, is referred to as the: a. Direct method of reporting net cash provided or used by operating activities. b. Cash basis of accounting. c. Classified statement of cash flows. d. Indirect method of reporting net cash provided or used by operating activities. e. Net method of reporting cash flows from operating activities.

a. Direct method of reporting net cash provided or used by operating activities.

Distributions of cash or other resources by a business to its stockholders are called: a. Dividends. b. Expenses. c. Assets. d. Retained earnings. e. Net Income.

a. Dividends

The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the retained earnings account is the: a. Income Summary account. b. Closing account. c. Balance column account. d. Contra account. e. Nominal account.

a. Income Summary account.

Which of the following statements is true? a. Interest on bonds is tax deductible. b. Interest on bonds is not tax deductible. c. Dividends to stockholders are tax deductible. d. Bonds do not have to be repaid. e. Bonds always increase return on equity.

a. Interest on bonds is tax deductible.

The right of common shareholders to purchase their proportional share of any common stock later issued by the corporation is called a: a. Preemptive right. b. Proxy right. c. Right to call. d. Financial leverage. e. Voting right.

a. Preemptive right.

A dividend preference for preferred stock means that: a. Preferred stockholders are allocated their dividends before dividends are allocated to common shareholders. b. Preferred shareholders are guaranteed dividends. c. Dividends are paid quarterly. d. Preferred stockholders prefer dividends more than common stockholders. e. Dividends must be declared on preferred stock.

a. Preferred stockholders are allocated their dividends before dividends are allocated to common shareholders.

Plant assets are defined as: a. Tangible assets that have a useful life of more than one accounting period and are used in the operation of a business. b. Current assets. c. Held for sale. d. Intangible assets used in the operations of a business that have a useful life of more than one accounting period. e. Tangible assets used in the operation of business that have a useful life of less than one accounting period.

a. Tangible assets that have a useful life of more than one accounting period and are used in the operation of a business.

Contingent liabilities must be recorded if: a. The future event is probable and the amount owed can be reasonably estimated. b. The future event is remote. c. The future event is reasonably possible but not estimable. d. The amount owed cannot be reasonably estimated. e. The future event is probable but not estimable.

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

The chief executive officer earns $20,000 per month. As of May 31, her gross pay was $100,000. The tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. What is the amount of FICA-Social Security withheld from this employee for the month of June? a. $7,347.00 b. $1,147.00 c. $1,240.00 d. $268.25 e. $290.00

b. $1,147.00 $118,500 − $100,000 = $18,500 subject to FICA-Social Security × .062 = $1,147.00

A company purchased a delivery van for $28,000 with a salvage value of $3,000 on September 1, Year 1. It has an estimated useful life of 5 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, Year 1? a. $5,000. b. $1,667. c. $1,400. d. $1,250. e. $2,067.

b. $1,667. Depreciation Expense = (Cost - Salvage Value)/Est Useful Life * Length of Ownership Depreciation Expense = ($28,000 - $3,000)/5 * 4/12; Depreciation Expense = $1,667

Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 84,500 units of product. Determine the machines' second year depreciation under the straight-line method. a. $16,900. b. $16,000. c. $17,400. d. $18,379. e. $20,880.

b. $16,000. Depreciation Expense = (Cost - Salvage Value)/Estimated Useful Life Depreciation Expense = ($87,000 - $7,000)/5 = $16,000

On August 31 of the current year, the assets and liabilities of Gladstone, Inc. are as follows: Cash $30,000; Supplies, $600; Equipment, $10,000; Accounts Payable, $8,500. What is the amount of equity as of August 31 of the current year? a. $49,100 b. $32,100 c. $12,100 d. $10,900 e. $30,900

b. $32,100 Assets - Liabilities = Equity Cash + Supplies + Equipment - Accounts Payable = Equity $30,000 + $600 + $10,000 - $8,500 = $32,100

An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The employee has $182 in federal income taxes withheld. The employee has voluntary deductions for health insurance of $150 and contributes $75 to a retirement plan each month. What is the amount of net pay for the employee for the month of January? (Round your intermediate calculations to two decimal places.) a. $4,827.00 b. $4,672.25 c. $4,628.25 d. $4,386.25 e. $4,430.25

b. $4,672.25 Net Pay = Gross Pay − Federal Income Tax − FICA-SS Tax − FICA-Medicare Tax − Health Insurance − Retirement Plan Net Pay = $5,500 − $182 − $341* − $79.75** − $150 − $75 = $4,672.25 *FICA-SS Tax $5,500 * 0.062 = $341.00 **FICA-Medicare Tax $5,500 * 0.0145 = $79.75

Percy Corporation was formed on January 1. The corporate charter authorized 100,000 shares of $10 par value common stock. During the first month of operation, the corporation issued 400 shares to its attorneys in payment of a $5,000 charge for drawing up the articles of incorporation. The entry to record this transaction would include: a. A debit to Organization Expenses for $4,000. b. A debit to Organization Expenses for $5,000. c. A credit to Common Stock for $5,000. d. A credit to Paid-in Capital in Excess of Par Value, Common Stock for $5,000. e. A debit to Paid-in Capital in Excess of Par Value, Common Stock for $2,000.

b. A debit to Organization Expenses for $5,000.

The contract between the bond issuer and the bondholders identifying the rights and obligations of the parties, is called a(n): a. Debenture. b. Bond indenture. c. Mortgage. d. Installment note. e. Mortgage contract.

b. Bond indenture.

Since an error in the period-end inventory causes an offsetting error in the next period: a. Managers can ignore the error. b. It is said to be self-correcting. c. It affects only income statement accounts. d. If affects only balance sheet accounts. e. Is immaterial for managerial decision making.

b. It is said to be self-correcting.

Which internal control principle prescribes the use of pre-numbered printed checks? a. Technological controls. b. Maintain adequate records. c. Perform regular and independent reviews. d. Establish responsibilities. e. Divide responsibility for related transactions.

b. Maintain adequate records.

A liability for dividends exists: a. When cumulative preferred stock is sold. b. On the date of declaration. c. On the date of record. d. On the date of payment. e. For dividends in arrears on cumulative preferred stock.

b. On the date of declaration.

The party that has the right to exercise a call option on callable bonds is: a. The bondholder. b. The bond issuer. c. The bond indenture. d. The bond trustee. e. The bond underwriter.

b. The bond issuer.

Some companies choose to avoid assigning incidental costs of acquiring merchandise to inventory by recording them as cost of goods sold when incurred. The principle that supports this is called: a. The expense recognition principle. b. The materiality constraint. c. The cost principle. d. The conservation constraint principle. e. The lower of cost or market principle.

b. The materiality constraint.

The following statements are true regarding the operating cycle of a merchandising company except: a. The operating cycle begins with the purchase of merchandise. b. The operating cycle is shortened by credit sales. c. The operating cycle ends with the collection of cash from the sale of merchandise. d. The operating cycle can vary in length among different merchandising companies. e. The operating cycle sometimes involves accounts receivable.

b. The operating cycle is shortened by credit sales.

The assets of a company total $700,000; the liabilities, $200,000. What are the net assets? a. $900,000. b. $700,000. c. $500,000. d. $200,000. e. It is impossible to determine unless the amount of stockholder investments is known.

c. $500,000 Assets = Liabilities + Equity $700,000 = $200,000 + Equity; Equity = $500,000

Valley Spa purchased $7,800 in plumbing components from Tubman Co. Valley Spa Studios signed a 60-day, 10% promissory note for $7,800. If the note is dishonored, what is the amount due on the note? (Use 360 days a year.) a. $130 b. $7,800 c. $7,930 d. $8,050 e. $8,130

c. $7,930 $7,800 * 0.10 * 60/360 = $130 + $7,800 = $7,930

In its first year of operations, Grace Company reports the following: Earned revenues of $60,000 ($52,000 cash received from customers); Incurred expenses of $35,000 ($31,000 cash paid toward them); Prepaid $8,000 cash for costs that will not be expensed until next year. Net income under the cash basis of accounting is: a. $17,000. b. $21,000. c. $13,000. d. $25,000. e. None of the answer choices is correct.

c. 13,000 Cash received, $52,000, minus cash paid for expenses, $39,000 ($31,000 + $8,000), equals cash-basis income, $13,000.

Sandoval needs to determine its year-end inventory. The warehouse contains 20,000 units, of which 3,000 were damaged by flood and are not sellable. Another 2,000 units were purchased from Markor Company, FOB shipping point, and are currently in transit. The company also consigns goods and has 4,000 units at a consignee's location. How many units should Sandoval include in its year-end inventory? a. 29,000 b. 21,000 c. 23,000 d. 19,000 e. 26,000

c. 23,000 20,000 - 3,000 + 2,000 + 4,000 = 23,000

Martinez owns an asset that cost $87,000 with accumulated depreciation of $40,000. The company sells the equipment for cash of $42,000. At the time of sale, the company should record: a. A gain on sale of $2,000. b. A loss on sale of $2,000. c. A loss on sale of $5,000.Correct d. A gain on sale of $5,000. e. A loss on sale of $45,000.

c. A loss on sale of $5,000. Selling price $42,000 - Book value ($87,000 - $40,000) = $5,000 loss.

Adjusting entries: a. Affect only income statement accounts. b. Affect only balance sheet accounts. c. Affect both income statement and balance sheet accounts. d. Affect cash accounts. e. Affect only equity accounts.

c. Affect both income statement and balance sheet accounts.

Amounts received in advance from customers for future products or services: a. Are revenues. b. Increase income. c. Are liabilities. d. Are not allowed under GAAP. e. Require an outlay of cash in the future.

c. Are liabilities.

Preparation of the statement of cash flows does not involve: a. Computing the net increase or decrease in cash. b. Computing and reporting net cash provided or used by operations. c. Computing the profit compared to the net increase or decrease in cash. d. Computing and reporting net cash provided or used by financing activities. e. Computing and reporting net cash provided or used by investing activities.

c. Computing the profit compared to the net increase or decrease in cash.

The right side of a T-account is a(n): a. Debit. b. Increase. c. Credit. d. Decrease. e. Account balance.

c. Credit

When a company is obligated for sales taxes payable, it is reported as a(n): a. Estimated liability.Incorrect b. Contingent liability. c. Current liability. d. Business expense. e. Long-term liability.

c. Current liability.

At the end of the day, the cash register tape shows $1,000 in cash sales but the count of cash in the register is $1,010. The proper entry to account for this excess is: a. Debit Cash $1,000; credit Sales $1,000. b. Debit Cash $1,010; credit Sales $1,010. c. Debit Cash $1,010; credit Sales $1,000; credit Cash Over and Short $10. d. Debit Cash $1,000; debit Cash Over and Short for $10; credit Sales $1,010. e. Debit Cash Over and Short $10; credit Cash $10.

c. Debit Cash $1,010; credit Sales $1,000; credit Cash Over and Short $10.

On January 1, Year 1, Stratton Company borrowed $100,000 on a 10-year, 7% installment note payable. The terms of the note require Stratton to pay 10 equal payments of $14,238 each December 31 for 10 years. The required general journal entry to record the payment on the note on December 31, Year 2 is: a. Debit Interest Expense $7,000; debit Notes Payable $7,238; credit Cash $14,238.Incorrect b. Debit Notes Payable $7,000; debit Interest Expense $7,238; credit Cash $14,238. c. Debit Interest Expense $6,493; debit Notes Payable $7,745; credit Cash $14,238. d. Debit Notes Payable $14,238; credit Cash $14,238. e. Debit Notes Payable $10,000; debit Interest Expense $4,238; credit Cash $14,238.

c. Debit Interest Expense $6,493; debit Notes Payable $7,745; credit Cash $14,238. Year 1 - Interest expense = $100,000 * 7% = $7,000 Principal payment = $14,238 - $7,000 = $7,238 Year 2 - Interest expense = ($100,000 - $7,238) * 7% = $6,493 Principal payment = $14,238 - $6,493 = $7,745

On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000. What is the adjusting entry for the accrued interest at December 31 on the note? (Use 360 days a year.) a. No adjusting entry is required. b. Debit interest payable, $120; credit interest expense, $120. c. Debit Interest Expense, $120; credit Interest Payable, $120. d. Debit Interest Expense, $720; credit Interest Payable, $720. e. Debit Interest Payable, $240; credit Interest Expense, $240.

c. Debit Interest Expense, $120; credit Interest Payable, $120. Interest Expense = Principal * Interest Rate * Time Interest Expense = $9,000 * 0.08 * 60/360; Interest Expense = $120

Fetzer Company declared a $0.55 per share cash dividend. The company has 200,000 shares authorized, 190,000 shares issued, and 8,000 shares in treasury stock. The journal entry to record the dividend declaration is: a. Debit Retained Earnings $104,500; credit Common Dividends Payable $104,500. b. Debit Common Dividends Payable $104,500; credit Cash $104,500. c. Debit Retained Earnings $100,100; credit Common Dividends Payable $100,100. d. Debit Common Dividends Payable $100,100; credit Cash $100,100. e. Debit Retained Earnings $110,000; credit Common Dividends Payable $110,000.

c. Debit Retained Earnings $100,100; credit Common Dividends Payable $100,100. $0.55 * (190,000 shares - 8,000 shares) = $100,100

The accounting principle that requires important noncash financing and investing activities be reported on the statement of cash flows or in a footnote is the: a. Historical cost principle. b. Materiality principle. c. Full disclosure principle. d. Going concern principle. e. Business entity principle.

c. Full disclosure principle.

The following statements regarding gross profit are true except: a. Gross profit is also called gross margin. b. Gross profit less other operating expenses equals income from operations. c. Gross profit is not calculated on the multiple-step income statement. d. Gross profit must cover all operating expenses to yield a return for the owner(s) of the business. e. Gross profit equals net sales less cost of goods sold.

c. Gross profit is not calculated on the multiple-step income statement.

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is: a. Operating activities. b. Financing activities. c. Investing activities. d. Schedule of noncash investing or financing activity. e. This is not reported on the statement of cash flows.

c. Investing activities.

Generally accepted accounting principles require that the inventory of a company be reported at: a. Market value. b. Historical cost. c. Lower of cost or market. d. Replacement cost. e. Retail value.

c. Lower of cost or market.

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as: a. Financing activities. b. Investing activities. c. Operating activities. d. Direct activities. e. Indirect activities.

c. Operating activities.

A bondholder that owns a $1,000, 10%, 10-year bond has: a. Ownership rights in the issuing company. b. The right to receive $10 per year until maturity. c. The right to receive $1,000 at maturity. d. The right to receive $10,000 at maturity. e. The right to receive dividends of $1,000 per year.

c. The right to receive $1,000 at maturity.

The credit purchase of a new oven for $4,700 was posted to Kitchen Equipment as a $4,700 debit and to Accounts Payable as a $4,700 debit. What effect would this error have on the trial balance? a. The total of the Debit column of the trial balance will exceed the total of the Credit column by $4,700. b. The total of the Credit column of the trial balance will exceed the total of the Debit column by $4,700. c. The total of the Debit column of the trial balance will exceed the total of the Credit column by $9,400. d. The total of the Credit column of the trial balance will exceed the total of the Debit column by $9,400. e. The total of the Debit column of the trial balance will equal the total of the Credit column.

c. The total of the Debit column of the trial balance will exceed the total of the Credit column by $9,400.

A company purchased a tract of land for its natural resources at a cost of $1,000,000. It expects to harvest 5,000,000 board feet of timber from this land. The salvage value of the land is expected to be $200,000. The depletion expense per board foot of timber is: a. $0.75. b. $0.24. c. $0.20. d. $0.16. e. $0.04.

d. $0.16. Depletion Expense per board foot = (Cost - Salvage Value)/Estimated Useful Life in feet Depletion Expense per board foot = ($1,000,000 - $200,000)/5,000,000 = $0.16/board foot

A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: (See image) All sales are made on credit. Based on past experience, the company estimates that 0.6% of net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared? a. $1,275 b. $1,775 c. $4,500 d. $4,800 e. $5,500

d. $4,800 $800,000 * 0.006 = $4,800

Juniper Company uses a perpetual inventory system and the gross method of accounting for purchases. The company purchased $9,750 of merchandise on August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of merchandise. On August 26, it paid the full amount due. The amount of the cash paid on August 26 equals: a. $8,167.50. b. $9,652.50. c. $9,750.00. d. $8,250.00. e. $8,152.50.

d. $8,250.00. Cash Paid = ($9,750 - $1,500) = $8,250 No discount may be taken because the payment was not within 10 days of the purchase.

At the beginning of the year, a company's balance sheet reported the following balances: Total Assets = $225,000; Total Liabilities = $25,000; Total Paid-in capital of $100,000; and Retained earnings = $100,000. During the year, the company reported revenues of $46,000 and expenses of $30,000. In addition, dividends for the year totaled $20,000. Assuming no other changes to Retained earnings, the balance in the Retained earnings account at the end of the year would be: a. $116,000. b. $136,000. c. $24,000. d. $96,000. e. $104,000.

d. $96,000. Beginning Retained earnings $100,000 + Revenues $46,000 - Expenses $30,000 - Dividends $20,000 = Ending Retained earnings $96,000.

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. A credit to Accumulated Depreciation of $40,000. b. A credit to Gain on Sale of $2,000. c. A credit to Machinery of $47,000. d. A debit to Cash of $42,000. e. A debit to Accumulated Depreciation of $47,000.

d. A debit to Cash of $42,000. Selling price $42,000 - Book value ($87,000 - $40,000) = $5,000 Loss.

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is: a. Cash basis accounting. b. The expense recognition (matching) principle. c. The time period assumption. d. Accrual basis accounting. e. Revenue basis accounting.

d. Accrual basis accounting.

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: a. Cash Lost. b. Bank Reconciliation. c. Petty Cash. d. Cash Over and Short. e. Cash Receivable.

d. Cash Over and Short.

Golddigger Services, Inc. provides services to clients. On May 1, a client prepaid Golddigger Services $60,000 for 6-months services in advance. Golddigger Services' general journal entry to record this transaction will include a: a. Debit to Unearned Management Fees for $60,000. b. Credit to Management Fees Earned for $60,000. c. Credit to Cash for $60,000. d. Credit to Unearned Management Fees for $60,000. e. Debit to Management Fees Earned for $60,000.

d. Credit to Unearned Management Fees for $60,000.

A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: (see image) All sales are made on credit. Based on past experience, the company estimates 0.6% of net credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense? a. Debit Bad Debts Expense $2,130; credit Allowance for Doubtful Accounts $2,130. b. Debit Bad Debts Expense $2,630; credit Allowance for Doubtful Accounts $2,630. c. Debit Bad Debts Expense $4,300; credit Allowance for Doubtful Accounts $4,300. d. Debit Bad Debts Expense $4,800; credit Allowance for Doubtful Accounts $4,800. e. Debit Bad Debts Expense $5,300; credit Allowance for Doubtful Accounts $5,300.

d. Debit Bad Debts Expense $4,800; credit Allowance for Doubtful Accounts $4,800. $800,000 * 0.006 = $4,800

Jervis accepts all major bank credit cards, including those issued by Northern Bank (NB), which assesses a 3% charge on sales for using its card. On June 28, Jervis had $3,500 in NB Card credit sales. What entry should Jervis make on June 28 to record the deposit? a. Debit Cash $3,500; credit Sales $3,500 b. Debit Accounts Receivable $3,500; credit Sales $3,500 c. Debit Cash $3,605; credit Credit Card Expense $105; credit Sales $3,500 d. Debit Cash $3,395; debit Credit Card Expense $105; credit Sales $3,500 e. Debit Accounts Receivable $3,395; debit Credit Card Expense $105; credit Sales $3,500

d. Debit Cash $3,395; debit Credit Card Expense $105; credit Sales $3,500 Credit card fee expense: $3,500 * .03 = $105Cash received: $3,500 - $105 = $3,395

Jax Recording Studio purchased $7,800 in electronic components from Music World. Jax signed a 60-day, 8% promissory note for $7,800. Music World's journal entry to record the collection on the maturity date is: a. Debit Cash $7,800; credit Accounts Receivable $7,800 b. Debit Accounts Receivable $7,904; credit Notes Receivable $7,800; credit Interest Receivable $104 c. Debit Notes Receivable $8,008; credit Cash $7,904; credit Interest Revenue $104 d. Debit Cash $7,904; credit Notes Receivable $7,800; credit Interest Revenue $104 e. Debit Cash $7,904; credit Notes Receivable $7,904

d. Debit Cash $7,904; credit Notes Receivable $7,800; credit Interest Revenue $104 $7,800 + ($7,800 * .08 * 60/360) = $7,904 Cash collected$7,800 * .08 * 60/360 = $104 Interest Revenue

A company's board of directors votes to declare a cash dividend of $1.00 per share on its 12,000 common shares outstanding. The journal entry to record the declaration of the cash dividend is: a. Debit Dividend Expense $12,000; credit Cash $12,000. b. Debit Dividend Expense $12,000; credit Common Dividend Payable $12,000. c. Debit Common Dividend Payable $12,000; credit Cash $12,000. d. Debit Retained Earnings $12,000; credit Common Dividend Payable $12,000. e. Debit Common Dividend Payable $12,000; credit Retained Earnings $12,000.

d. Debit Retained Earnings $12,000; credit Common Dividend Payable $12,000.

In the accounting records of a defendant, lawsuits: a. Are estimated liabilities. b. Should always be recorded. c. Should always be disclosed. d. Should be recorded if payment for damages is probable and the amount can be reasonably estimated. e. Should never be recorded.

d. Should be recorded if payment for damages is probable and the amount can be reasonably estimated.

Revenues are: a. The same as net income. b. The excess of expenses over assets. c. Resources owned or controlled by a company. d. The increase in equity from a company's sales of products and services. e. The costs of assets or services used.

d. The increase in equity from a company's sales of products and services.

Which of the following statements regarding increases in the value of plant assets under U.S. GAAP and IFRS is true? a. U.S. GAAP allows companies to record increases in the value of plant assets. b. IFRS prohibits upward asset revaluations. c. Under GAAP, a company can reverse an impairment and record that increase in income. d. U.S. GAAP prohibits companies from recording increases in the value of plant assets. e. Under IFRS, an impairment increase beyond as asset's original cost is not recorded.

d. U.S. GAAP prohibits companies from recording increases in the value of plant assets.

Outstanding checks refer to checks that have been: a. Written, recorded, sent to payees, and received and paid by the bank. b. Written and not yet recorded in the company books. c. Held as blank checks. d. Written, recorded on the company books, sent to the payee, but not yet paid by the bank. e. Issued by the bank.

d. Written, recorded on the company books, sent to the payee, but not yet paid by the bank.

Monarch Company uses a weighted-average perpetual inventory system and has the following purchases and sales: (See image) What is the value of cost of goods sold? a. $278. b. $272. c. $126. d. $398. e. $120.

e. $120. Cost of goods sold = 12 units * $10 per unit = $120

On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton Summers as payment on account. Compute the amount due at maturity for the note. (Use 360 days a year.) a. $8,628 b. $8,192 c. $8,613 d. $8,500 e. $8,670

e. $8,670 $8,500 * 0.08 * 90/360 = $170 + $8,500 = $8,670

Pelcher Co. maintains a $400 petty cash fund. On January 31, the fund is replenished. The accumulated receipts on that date represent $110 for office supplies, $140 for merchandise inventory, and $70 for miscellaneous expenses. There is a cash overage of $4. Based on this information, the amount of cash in the fund before the replenishment is: a. $400. b. $320. c. $80. d. $76. e. $84.

e. $84. $400 fund balance minus $320 in receipts = $80 theoretical cash balance. Since there was a $4 overage, the cash on hand was more than expected. $80 + $4 = $84.

A cash dividend payment to shareholders during the year should be reported on the statement of cash flows as: a. An increase in cash flows from financing activities b. An increase in cash flows from investing activities c. A decrease in cash flows from operating activities d. A decrease in cash flows from investing activities e. A decrease in cash flows from financing activities

e. A decrease in cash flows from financing activities

Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is referred to as: a. Participating preferred stock. b. Callable preferred stock. c. Cumulative preferred stock. d. Convertible preferred stock. e. Noncumulative preferred stock.

e. Noncumulative preferred stock.

The statement of cash flows reports all but which of the following: a. Cash flows from operating activities. b. Cash flows from financing activities. c. Cash flows from investing activities. d. Significant noncash financing and investing activities. e. The financial position of the company at the end of the accounting period.

e. The financial position of the company at the end of the accounting period.