Acct 225 Final Exam

Portia Grant is an employee who is paid monthly. For the month of January of the current year, she earned a total of $8,260. The FICA tax 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 FUTA tax rate of 0.6% and the SUTA tax rate of 5.4% are applied to the first $7,000 of an employee's pay. The amount of federal income tax withheld from her earnings was $1,325.17. What is the total amount of taxes withheld from the Portia's earnings? A. $3,097.17 B. $2,443.21 C. $1,957.06 D. $1,722.00 E. $1,495.36

$1,957.06 Total Taxes = Federal Income Tax + FICA-SS Tax + FICA-Medicare Tax Total Taxes = $1,325.17+ $512.12 + $119.77** = $1,957.06 * FICA-SS Tax $8,260.00 * 0.062 = $512.12 **FICA-Medicare Tax $8,260.00 * 0.0145 = $119.77

Mayan Company had net income of $132,000. The weighted-average common shares outstanding were 80,000. The company sold 3,000 shares before year end. The company declared a $27,000 dividend on its noncumulative, nonparticipating preferred stock. There were no other stock transactions. The company's earnings per share is: A. $1.65. B. $1.99. C. $1.31. D. $0.34. E. $4.89.

$1.31 Earnings per Share = (Net Income - Preferred Dividends)/Weighted-Average Common Shares Outstanding Earnings per Share = ($132,000 - $27,000)/80,000 = $1.31

Marquis Company uses a weighted-average perpetual inventory system and has the following purchases and sales: August 2 10 units were purchased at $12 per unit. August 18 15 units were purchased at $14 per unit. August 29 12 units were sold. What is the amount of the cost of goods sold for this sale? (Round average cost per unit to 2 decimal places.) A. $148.00 B. $150.50 C. $158.40 D. $210.00 E. $330.00

$158.40 Average cost = [(10 * $12) + (15 * $14)]/25 units = $13.20/unit Cost of sale = 12 units * $13.20/unit = $158.40

Clayborn Company deposits all cash receipts on the day they are received and makes all cash payments by check. At the close of business on May 31, its Cash account shows a debit balance of $17,025. Clayborn's May bank statement shows $15,800 on deposit in the bank. Determine the adjusted cash balance using the following information: Deposit in transit $5,200 Outstanding checks $4,600 Bank service fees, not yet recorded by company $25 A NSF check from a customer, not yet recorded by the company $600 The adjusted cash balance should be: A. $16,400 B. $11,200 C. $21,000 D. $16,425 E. $17,000

$16,400 Bank balance $15,800 + Deposit in transit 5,200 - Outstanding checks (4,600) Adjusted bank balance $16,400 Book balance $17,025 Bank service fees (25) NSF returned (600) Adjusted book balance $16,400

A company had no office supplies available at the beginning of the year. During the year, the company purchased $250 worth of office supplies. On December 31, $75 worth of office supplies remained. How much should the company report as office supplies expense for the year? A. $75. B. $125. C. $175. D. $250. E. $325.

$175 (Asset) ___________________________________ Office Supplies ___________________________________ 0 250 ?? 175 ___________________________________ 75 250-75=175

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 double-declining-balance method. A. $16,900. B. $16,000. C. $17,400. D. $18,379. E. $20,880.

$20,880 Depreciation Expense = Beginning of Year Book Value * Double Straight-line Rate Depreciation Expense = $87,000 * (2 * 20%) = $34,800 (Depreciation Expense, year 1) Depreciation Expense = Beginning of Year Book Value * Double Straight-line Rate Depreciation Expense = ($87,000 - $34,800) * (2 * 20%) = $20,880 (Deprec. Exp, year 2)

A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6 they purchased 6 units at $25 each. On November 8, 8 units were sold for $55 each. Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale? A. $304 B. $296 C. $288 D. $280 E. $276

$276 Units available = 5 + 10 + 6 = 21 units Units in inventory = 21 - 8 units = 13 units Cost of inventory = (5 * $20) + (8 * $22) = $276

A company pays its employees $4,000 each Friday, which amounts to $800 per day for the five-day workweek that begins on Monday. If the monthly accounting period ends on Thursday and the employees worked through Thursday, the amount of salaries earned but unpaid at the end of the accounting period is: A. $4,000. B. $800. C. $1,600. D. $2,400. E. $3,200.

$3,200 Mon-Thurs 800x4=3200

McCarthy Company has inventory of 8 units at a cost of $200 each on October 1. On October 2, it purchased 20 units at $205 each. 11 units are sold on October 4. Using the FIFO perpetual inventory method, what is the value of inventory after the October 4 sale? A. $3,485. B. $3,445. C. $3,500. D. $3,472. E. $3,461.

$3,485 Units in inventory = 8 + 20 - 11 = 17 17 units * $205 = $3,485

A company purchased property for $100,000. The property included a building, a parking lot, and land. The building was appraised at $62,000; the land at $35,000, and the parking lot at $18,000. Land should be recorded in the accounting records with an allocated cost of: A. $ 0. B. $ 30,435. C. $ 35,000. D. $ 46,087. E. $100,000.

$30,435 $100,000 * [$35,000/($62,000 + $35,000 + $18,000)] = $30,435

Bedrock Company reported a December 31 ending inventory balance of $412,000. The following additional information is also available: ▪ The ending inventory balance of $412,000 included $72,000 of consigned inventory for which Bedrock was the consignor. ▪ The ending inventory balance of $412,000 included $22,000 of office supplies that were stored in the warehouse and were to be used by the company's supervisors and managers during the coming year. Based on this information, the correct balance for ending inventory on December 31 is: A. $412,000 B. $340,000 C. $318,000 D. $362,000 E. $390,000

$390,000 - Start with beginning inventory of $412,000. The information in the first bullet point was handled correctly since inventory should include consigned goods for which the subject company is the consignor. No adjustment. With respect to the second bullet point, inventory should not include office supplies held for use. Subtract $22,000. Ending inventory should be $412,000 - $22,000 = $390,000.

.When originally purchased, a vehicle costing $23,000 had an estimated useful life of 8 years and an estimated salvage value of $3,000. After 4 years of straight-line depreciation, the asset's total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value. The depreciation expense in year 5 equals: A. $ 5,000. B. $ 2,875. C. $ 5,750. D. $11,500. E. $ 2,500.

$5,000 Accumulated Depreciation through the end of year 4: (Cost of Asset - Salvage Value)/Estimated Useful Life * Years Elapsed ($23,000 - $3,000)/8 * 4 = $10,000 Depreciation in Year 5 = (Cost of Asset - Accumulated Depreciation - Salvage Value)/Remaining Estimated Useful Life ($23,000 - $10,000 - $3,000)/2 = $5,000

Fragmental Co. leased a portion of its store to another company for eight months beginning on October 1, at a monthly rate of $800. Fragmental collected the entire $6,400 cash on October 1 and recorded it as unearned revenue. Assuming adjusting entries are only made at year-end, the adjusting entry made by Fragmental Co. on December 31 would be: A. A debit to Rent Revenue and a credit to Cash for $2,400. B. A debit to Rent Revenue and a credit to Unearned Rent for $2,400. C. A debit to Cash and a credit to Rent Revenue for $6,400. D. A debit to Unearned Rent and a credit to Rent Revenue for $2,400. E. A debit to Unearned Rent and a credit to Rent Revenue for $4,000.

$6,400 * 3/8 = $2,400 earned by December 31

A company normally sells its product for $20 per unit. However, the selling price has fallen to $15 per unit. This company's current inventory consists of 200 units purchased at $16 per unit. Replacement cost has now fallen to $13 per unit. What is the amount of the lower cost of market adjustment the company must make as a result of this decline in value? A. $1,000. B. $1,400. C. $400. D. $600. E. $800.

$600 200 units * ($16 - $13) = $600

A company issued 60 shares of $100 par value common stock for $7,000 cash. The total amount of paid-in capital is: A. $ 100. B. $ 600. C. $1,000. D. $6,000. . $7,000.

$7,000 The $7,000 cash will be allocated $6,000 for common stock and $1,000 for Paid in Capital in Excess of Par, Common. Both of these together are paid-in-capital so 1,000+6,000=7,000.

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: Accounts receivable.................................................. $375,000 debit Allowance for uncollectible accounts....................... 500 debit Net Sales................................................................... 800,000 credit 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

$800,000 * 0.006 = $4,800

A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life. In the first year, 15,000 bolts were produced. In the second year, production increased to 19,000 units. Using the units-of-production method, what is the amount of accumulated depreciation at the end of the second year? A. $48,133. B. $45,600. C. $86,133. D. $23,750. E. $81,600.

$81,600 Depreciation Expense = [(Cost - Salvage Value)/Estimated Useful Life (in units)] * Units Produced Depreciation per unit = ($190,000 - $10,000) /75,000 units = $2.40 per unit Accumulated Depreciation = $2.40 * (15,000+ 19,000) = $81,600

A company has a selling price of $1,800 each for its printers. Each printer has a 2 year warranty that covers replacement of defective parts. It is estimated that 2% of all printers sold will be returned under the warranty at an average cost of $150 each. During November, the company sold 30,000 printers, and 400 printers were serviced under the warranty at a total cost of $55,000. The balance in the Estimated Warranty Liability account at November 1 was $29,000. What is the company's warranty expense for the month of November? A. $26,000 B. $45,000 C. $55,000 D. $60,000 E. $90,000

$90,000 Warranty Expense = (30,000 units * $150) * 0.02 = $90,000

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.

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

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.

32,100 (30,000+600+10,000-8,500) =32,100 EQUITY

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 above.

52,000-(31,000+8,000)=13,000

On March 12, Klein Company sold merchandise in the amount of $7,800 to Babson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Klein uses the perpetual inventory system and the net method of accounting for sales. On March 15, Babson returns some of the merchandise, which is not defective. The selling price of the returned merchandise is $600 and the cost of the merchandise returned is $350. The entry(ies) that Klein must make on March 15 is (are): A. Sales returns and allowances 588 Accounts receivable 588 Merchandise inventory 350 Cost of goods sold 350 B. Sales returns and allowances 588 Accounts receivable 588 Merchandise inventory 343 Cost of goods sold 343 C. Accounts receivable 600 Sales returns and allowances 600 D. Accounts receivable 600 Sales returns and allowances 600 Cost of goods sold 350 Merchandise inventory 350

A ( 600*.02= 12 therefore: 600-12= 588)

A corporation issued 10,000 shares of its $5 par value common stock in exchange for land that has a market value of $125,000. The entry to record this transaction would include: A. A debit to Common Stock for $50,000. B. A debit to Land for $50,000. C. A credit to Land for $50,000. D. A credit to Paid-in Capital in Excess of Par Value, Common Stock for $75,000. E. A credit to Common Stock for $125,000.

A credit to Paid-in Capital in Excess of Par Value, Common Stock for $75,000. Land $125,000 Paid In Capital, Common Stock $75,000 Common Stock $50,000

On May 1, Sellers Marketing Company received $1,500 from Franco Marcelli for a marketing campaign effective from May 1 this year to April 30 of the following year. The Cash receipt was recorded as unearned fees and at year-end on December 31, $1,000 of the fees had been earned. Assuming adjustments are only made at year-end, the adjusting entry on December 31 would be: A. A debit to Unearned Fees and a credit to Cash for $500. B. A debit to Fees Earned and a credit to Unearned Fees for $500. C. A debit to Unearned Fees and a credit to Fees Earned for $1,000. D. A debit to Fees Earned and a credit to Cash for $1,000. E. A debit to Fees Earned and a credit to Cash for $500.

A debit to Unearned Fees and a credit to Fees Earned for $1,000. (Liability) ___________________________________ Unearned Fees ___________________________________ 1500 ? 1000 ___________________________________ 500 Unearned fees 1000 Revenue 1000

An asset's book value is $36,000 on January 1, Year 6. The asset is being depreciated $500 per month using the straight-line method. Assuming the asset is sold on July 1, Year 7 for $25,000, the company should record: A. Neither a gain or loss is recognized on this type of transaction. B. A gain on sale of $2,000. C. A loss on sale of $1,000. D. A gain on sale of $1,000. E. A loss on sale of $2,000.

A loss on sale of $2,000 If the asset's book value is $36,000 on January 1, Year 6 and is being depreciated $500 per month, $9,000 (18 x $500) of additional depreciation expense would be recognized by July 1, Year 7. Thus, the asset's book value on that date would be $27,000. If the asset is sold for $25,000, a loss on sale of $2,000 should be recognized.

Gideon Company uses the allowance 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 2000 Allowance for doubtful accounts 2000 Cash 2000 Accounts receivable - A. Hopkins 2000

If a check correctly written and paid by the bank for $749 is incorrectly recorded in the company's books for $794, how should this error be treated on the bank reconciliation? A. Subtract $45 from the bank's balance. B. Add $45 to the bank's balance. C. Subtract $45 from the book balance. D. Add $45 to the book balance. E. Subtract $45 from the bank's balance and add $45 to the book's balance.

Add $45 to the book balance $749 - $794 = $45 too much deducted from the company's cash account balance that must be added back to cash.

On January 1 of the current year, Jimmy's Sandwich Company reported stockholders' equity totaling $122,500. During the current year, total revenues were $96,000 while total expenses were $85,500. Also, during the current year paid $20,000 in cash dividends. No other changes in equity occurred during the year. If, on December 31 of the current year, total assets are $196,000, the change in total stockholders' equity during the year was: A. A decrease of $9,500. B. An increase of $9,500. C. An increase of $30,500. D. A decrease of $30,500. E. An increase of 73,500.

Answer: A Equity + Revenues - Expenses - Dividends = End. Equity $122,500 + $96,000 - $85,500 - $20,000 = Ending Equity = $113,000 Change in Equity = Beginning Equity - Ending Equity Change in Equity = $122,500 - $113,000 = $9,500 Decrease

Cash equivalents meet all of the following criteria except: A. Are readily convertible to a known cash amount. B. Include short-term investments purchased within 3 months of their maturity dates. C. Have a market value that is not sensitive to interest rate changes. D. Include short-term U.S. treasury bills. E. Are more liquid than cash.

Are more liquid than cash

If a company paid $38,000 of its accounts payable in cash, what was the effect on the accounting equation? A. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would decrease $38,000. B. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would increase $38,000. C. Assets would decrease $38,000, liabilities would decrease $38,000, and equity remains unchanged. D. There would be no effect on the accounts because the accounts are affected by the same amount. E. Assets would increase $38,000 and liabilities would decrease $38,000.

Assets decrease $38,000 and liabilities decrease $38,000 and equity unchanged

Managers place a high priority on internal control systems because the systems assist managers in all of the following except: A. Promoting efficient operations. B. Protecting assets. C. Upholding company policies. D. Ensuring reliable accounting. E. Assuring that no loss will occur.

Assuring that no loss will occur

Another name for a capital expenditure is: A. Revenue expenditure. B. Asset expenditure. C. Long-term expenditure. D. Contributed capital expenditure. E. Balance sheet expenditure.

Balance sheet expenditure

Marsha Bogswell is the sole stockholder of Bogswell Legal Services. Which accounting principle requires Marsha to keep her personal financial information separate from the financial information of Bogswell Legal Services? A. Monetary unit assumption. B. Going-concern assumption. C. Measurement (Cost) principle. D. Business entity assumption. E. Expense recognition (Matching) principle.

Business Entity Assumption

Which of the following does not require an adjusting entry at year-end? A. Accrued interest on notes payable. B. Supplies used during the period. C. Cash invested by stockholders. D. Accrued wages. E. Expired portion of prepaid insurance.

Cash invested by stockholders

The Income Summary account is used to: A. Adjust and update asset and liability accounts. B. Close the revenue and expense accounts. C. Determine the appropriate dividend amount. D. Replace the income statement under certain circumstances. E. Replace the Retained earnings account in some businesses.

Close the revenue and expense accounts

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.

Credit to Unearned Mgmt Fees for $60,000

When a company is obligated for sales taxes payable, it is reported as a(n): A. Estimated liability. B. Contingent liability. C. Current liability. D. Business expense. E. Long-term liability.

Current liability.

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

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

Prior to Jan 1, a company has never had any treasury stock transactions. A company repurchased 500 shares of its $1 par common stock on Mar 30 for $75 per share. On April 20, it reissued 75 of these shares at $86 per share. On June 1, it reissued 60 of the shares at $68 per share. What is the journal entry necessary to record the reissuance of treasury stock on April 20? A. Debit Common Stock $6,450; credit Cash $6,450. B. Debit Common Stock $60; debit Treasury Stock $6,390; credit Cash $6,450. C. Debit Common Stock $6,450; credit Treasury Stock $5,625; credit Paid-In Capital, Treasury Stock $825. D. Debit Cash $6,450; credit Paid-in Capital, Treasury Stock $825; credit Treasury Stock $5,625. E. Debit Cash $6,450; credit Treasury Stock $6,450.

Debit Cash $6,450; credit Paid-in Capital, Treasury Stock $825; credit Treasury Stock $5,625. Cash $6,450 (75x$86) Paid In Capital, Treasury Stock $825 ((86-75)x75) Treasury Stock $5,625 ($75x75shares)

A company issued 60 shares of $100 par value common stock for $7,000 cash. The journal entry to record the issuance is: A. Debit Cash $7,000; credit Common Stock $7,000. B. Debit Investment in Common Stock $7,000; credit Cash $7,000. C. Debit Cash $7,000; credit Common Stock $6,000; credit Paid-in Capital in Excess of Par Value, Common Stock $1,000. D. Debit Common Stock $6,000, debit Investment in Common Stock $1,000; credit Cash $7,000. E. Debit Cash $7,000; credit Paid-in Capital in Excess of Par Value, Common Stock $6,000, credit Common Stock $1,000.

Debit Cash $7,000; credit Common Stock $6,000; credit Paid-in Capital in Excess of Par Value, Common Stock $1,000.

Great Falls Co.'s bank reconciliation as of February 28 is shown below. Bank balance $37,643 Book balance $38,153 + Deposit in transit 2,950 Note collection +745 - Outstanding checks -1,730 Check printing -35 Adjusted bank balance $38,863 Adjusted book balance $38,863 One of the adjusting journal entries that Great Falls must record as a result of the bank reconciliation includes: A. Debit Note Payable $745; credit Cash $745. B. Debit Cash $745; credit Note Receivable $745. C. Debit Cash $2,950; credit Sales $2,950. D. Debit Cash $2,950; credit Accounts Receivable $2,950. E. Debit Miscellaneous Expense $35; credit Accounts Payable $35.

Debit Cash $745; credit Note Receivable $745

If a company has advance ticket sales totaling $2,000,000 for the upcoming football season, the receipt of cash would be journalized as: A. Debit Sales, credit Unearned Revenue. B. Debit Unearned Revenue, credit Sales. C. Debit Cash, credit Unearned Revenue. D. Debit Unearned Revenue, credit Cash. E. Debit Cash, credit Ticket sales payable.

Debit Cash, credit Unearned 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 payment 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.

Debit Common Dividend Payable $12,000; credit Cash $12,000.

Holman Company owns equipment with an original cost of $95,000 and an estimated salvage value of $5,000 that is being depreciated at $15,000 per year using the straight-line depreciation method, and only prepares adjustments at year-end. The adjusting entry needed to record annual depreciation is: A. Debit Depreciation Expense, $15,000; credit Equipment, $15,000. B. Debit Equipment, $15,000; credit Accumulated Depreciation, $15,000. C. Debit Depreciation Expense, $10,000; credit Accumulated Depreciation, $10,000. D. Debit Depreciation Expense, $10,000; credit Equipment, $10,000. E. Debit Depreciation Expense, $15,000; credit Accumulated Depreciation, $15,000.

Debit Depreciation Expense, $15,000; credit Accumulated Depreciation, $15,000.

On November 1, Orpheum Company accepted a $10,000, 90-day, 8% note from a customer settle an account. What entry should be made on the November 1 to record the acceptance of the note? A. Debit Note Receivable $10,000; credit Cash $10,000. B. Debit Note Receivable $10,000; credit Accounts Receivable $10,000. C. Debit Note Receivable $10,000; credit Sales $10,000. D. Debit Note Receivable $10,200; credit Accounts Receivable $10,000; credit Interest Revenue $200. E. Debit Sales $10,000; credit Accounts Receivable $10,000.

Debit Note Receivable $10,000; credit Accounts Receivable $10,000.

On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000. Alan made the appropriate year-end accrual. What is the journal entry as of March 1 to record the payment of the note assuming no reversing entry was made? A. Debit Notes Payable $9,000; debit Interest Payable $120; credit Cash $9,120. B. Debit Cash $9,240; credit Notes Payable $9,240. C. Debit Notes Payable $9,240; credit Interest Payable $120; credit Interest Expense $120; credit Cash $9,000. D. Debit Notes Payable $9,000; debit Interest Payable $120; debit Interest Expense $120; credit Cash $9,240. E. Debit Notes Payable $9,000; debit Interest Expense $240; credit Cash $9,240.

Debit Notes Payable $9,000; debit Interest Payable $120; debit Interest Expense $120; credit Cash $9,240. Interest Expense = Principal * Interest Rate * Time Interest Expense = $9,000 * 0.08 * 60/360; Interest Expense = $120 (debit to Interest Expense) Interest Payable = Principal * Interest Rate * Time Interest Payable = $9,000 * 0.08 * 60/360; Interest Payable = $120 (debit to Interest Payable) Maturity Value = Principal + Interest Expense Maturity Value = $9,000 + $240 = $9,240 (credit to Cash)

Spencer Co. decides to establish a petty cash fund with a beginning balance of $200. The company decides that any purchase under $25 can be processed through petty cash instead of the voucher system. The journal entry to record establishing the account is: A. Debit Cash $200 and credit Petty Cash $200. B. Debit Cash $200 and credit Cash Over and Short $200. C. Debit Petty Cash $200 and credit Cash $200. D. Debit Petty Cash $200; credit Cash $175; and credit Cash Over and Short $25. E. Debit Cash $200 and credit Petty Cash Over and Short $200.

Debit Petty Cash $200 and credit cash $200

On October 1, Goodwell Company rented warehouse space to a tenant for $2,500 per month. The tenant paid five months' rent in advance on that date, with the lease beginning immediately. The cash receipt was credited to the Unearned Rent account. The company's annual accounting period ends on December 31. The adjusting entry needed on December 31 is: A. Debit Rent Receivable, $12,500; credit Rent Earned, $12,500. B. Debit Rent Receivable, $7,500; credit Rent Earned, $7,500. C. Debit Unearned Rent, $7,500; credit Rent Earned, $7,500. D. Debit Unearned Rent, $5,000; credit Rent Earned, $5,000. E. Debit Unearned Rent, $12,500; credit Rent Earned, $12,500

Debit Unearned Rent, $7,500; credit Rent Earned, $7,500. (Liability) ___________________________________ Unearned Rent ___________________________________ 12,500 ? 7,500 ___________________________________ 5000 Unearned Rent 7500 Revenue 7500

At the end of the day, the cash register's record shows $2,050, but the count of cash in the cash register is $2,058. The correct entry to record the cash sales is A. Debit Cash $2,058; credit Sales $2,058. B. Debit Cash $2,058; credit Cash Over and Short $8; credit Sales $2,050. C. Debit Cash $2,050; credit Sales $2050. D. Debit Cash $2,050; debit Cash Over and Short $8; credit Sales $2,058. E. Debit Cash Over and Short $8, credit Sales $8.

Debit cash $2,058; credit Cash Over and Short $8; credit Sales $2,050

A credit entry: A. Increases asset and expense accounts, and decreases liability, common stock, and revenue accounts. B. Is always a decrease in an account. C. Decreases asset and expense accounts, and increases liability, common stock, and revenue accounts. D. Is recorded on the left side of a T-account. E. Is always an increase in an account.

Decreases asset and expense accounts, and increases liability, common stock and revenue accounts

The accounts receivable turnover is calculated by: A. Dividing net sales by average accounts receivable. B. Dividing net sales by average accounts receivable and multiplying by 365. C. Dividing average accounts receivable by net sales. D. Dividing average accounts receivable by net sales and multiplying by 365. E. Dividing net income by average accounts receivable.

Dividing net sales by average accounts receivable

Larry Bar opened a frame shop and completed these transactions: 1. Larry started the shop by investing $40,000 cash and equipment valued at $18,000 in exchange for common stock. 2. Purchased $70 of office supplies on credit. 3. Paid $1,200 cash for the receptionist's salary. 4. Sold a custom frame service and collected $1,500 cash on the sale. 5. Completed framing services and billed the client $200. What was the balance of the cash account after these transactions were posted? A. $300. B. $41,500. C. $40,300. D. $38,500. E. $38,700.

Ending Cash Balance = $40,000 (#1) - $1,200 (#3) + $1,500 (#4) = $40,300

A company has $80,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current credit balance (before adjustments) in the allowance for doubtful accounts is $1,200. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $4,800. TRUE OR FALSE?

FALSE Desired balance in allowance: $80,000 * .06 = $4,800 credit Current balance in allowance: 1,200 credit Adjustment to allowance: $3,600 credit

The inventory valuation method that has the advantages of assigning an amount to inventory on the balance sheet that approximates its current cost, and also mimics the actual flow of goods for most businesses is: A. FIFO. B. Weighted average. C. LIFO. D. Specific identification. E. Lower of cost or market.

FIFO

A company purchased a plant asset for $60,000. The asset has an estimated salvage value of $4,000, and an estimated useful life of 7 years. The annual depreciation expense using the straight-line method is $4,000 per year. True or False?

False Depreciation Expense = (Cost - Salvage Value)/Estimated Useful LifDepreciation Expense = ($60,000 - $4,000)/7; Depreciation Expense = $8,000

A company's net sales are $775,420, its costs of goods sold are $413,890, and its net income is $117,220. Its gross margin ratio equals: A. 46.6%. B. 53.4%. C. 28.3%. D. 31.5%. E. 40.5%.

Gross Margin Ratio = (Net Sales - Cost of Goods Sold)/Net Sales Gross Margin Ratio = ($775,420 -$413,890)/$775,420 = 46.6%

Closing the temporary accounts at the end of each accounting period does all of the following except: A. Serves to transfer the effects of these accounts to the retained earnings account on the balance sheet. B. Prepares the dividends account for use in the next period. C. Brings the revenue and expense accounts to zero balances. D. Has no effect on the retained earnings account. E. Causes retained earnings to reflect increases from revenues and decreases from expenses and dividends.

Has no effect on the retained earnings account

If the liabilities of a business increased $75,000 during a period of time and the equity in the business decreased $30,000 during the same period, the assets of the business must have: A. Decreased $105,000. B. Decreased $45,000. C. Increased $30,000. D. Increased $45,000. E. Increased $105,000.

Increased $45,000 (Liab 75,000-30,000=45,000 change in asset)

The number of days' sales uncollected: A. Is used to evaluate the liquidity of receivables. B. Is calculated by dividing accounts receivable by sales. C. Measures a company's ability to pay its bills on time. D. Measures a company's debt to income. E. Is calculated by dividing sales by accounts receivable.

Is used to evaluate the liquidity of receivables

Once the estimated depreciation expense for an asset is calculated: A. It cannot be changed, based on the historical cost principle. B. It may be revised based on new information. C. Any changes are accumulated and recognized when the asset is sold. D. The estimate itself cannot be changed; however, new information should be disclosed in financial statement footnotes. E. It cannot be changed, based on the consistency principle.

It may be revised based on new information.

The record of all accounts and their balances used by a business is called a: A. Journal. B. Book of original entry. C. General Journal. D. Balance column journal. E. Ledger (or General Ledger).

LEDGER (or General Ledger)

All of the following statements regarding long-term liabilities are true except? A. Liabilities not expected to be paid within the longer of one year or the company's operating cycle are reported as long-term liabilities. B. Long-term liabilities include long-term notes payable, warranty liabilities, lease liabilities, and bonds payable. C. Liabilities that do not have a fixed due date, but are payable on demand, are reported as long-term liabilities. D. Long-term liabilities can be reported on the balance sheet in a single total or in multiple categories. E. A single long-term liability can be divided between current and noncurrent sections on the balance sheet.

Liabilities that do not have a fixed due date, but are payable on demand, are reported as long-term liabilities.

The Superior Company acquired a building for $500,000. The building was appraised at a value of $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would require Superior to record the building on its records at $500,000? A. Monetary unit assumption. B. Going-concern assumption. C. Measurement (Cost) principle. D. Business entity assumption. E. Revenue recognition principle.

Measurement (Cost) Principle

Another name for equity is: A. Net income. B. Expenses. C. Net assets. D. Revenue. E. Net loss.

Net Assets

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: A. $94,275. B. $172,550. C. $174,250. D. $176,025. E. $177,725.

Net Sales = $94,275 + $83,450 - $1,700 - $3,475 = $172,550

The materiality constraint, as applied to bad debts: A. Permits the use of the direct write-off method when bad debts expenses are relatively small. B. Requires use of the allowance method for bad debts. C. Requires use of the direct write-off method. D. Requires that bad debts not be written off. E. Requires that expenses be reported in the same period as the sales they helped produce.

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

Which of the following accounts is used in the periodic inventory system but not used in the perpetual inventory system? A. Merchandise Inventory B. Sales C. Sales Returns and Allowances D. Accounts Payable E. Purchases

Purchases

Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 20,000 shares authorized, 9,000 shares issued, and 8,000 shares of common stock outstanding. The journal entry to record the dividend declaration is: A. Debit Retained Earnings $4,000; credit Common Dividends Payable $4,000. B. Debit Common Dividends Payable $4,000; credit Cash $4,000. C. Debit Retained Earnings $4,500; credit Common Dividends Payable $4,500. D. Debit Common Dividends Payable $4,500; credit Cash $4,500. E. Debit Retained Earnings $10,000; credit Common Dividends Payable $10,000.

Retained Earnings $4,000 Common Dividend Payable $4,000

On December 15 of the current year, Conrad Accounting Services signed a $40,000 contract with a client to provide bookkeeping services to the client in the following year. Which accounting principle would require Conrad Accounting Services to record the bookkeeping revenue in the following year and not the year the cash was received? A. Monetary unit assumption. B. Going-concern assumption. C. Measurement (Cost) principle. D. Business entity assumption. E. Revenue recognition principle.

Revenue Recognition Principle

Identify the accounts that would normally have balances in the credit column of a business's trial balance A. Liabilities and expenses. B. Assets and revenues. C. Revenues and expenses. D. Revenues and liabilities. E. Dividends and liabilities

Revenues and Liabilities would normally have a credit balance

Prior period adjustments are reported in the: A. Multiple-step income statement. B. Balance sheet. C. Statement of retained earnings. D. Statement of cash flows. E. Single-step income statement.

Statement of retained earnings.

Identify the account below that is classified as an asset account: A. Unearned Revenue B. Accounts Payable C. Supplies D. Common Stock E. Service Revenue

Supplies

A $130 credit to Supplies was credited to Fees Earned by mistake. By what amounts are the accounts under- or overstated as a result of this error? A. Supplies, understated $130; Fees Earned, overstated $130. B. Supplies, understated $260; Fees Earned, overstated $130. C. Supplies, overstated $130; Fees Earned, overstated $130. D. Supplies, overstated $130; Fees Earned, understated $130. E. Supplies, overstated $260; Fees Earned, understated $130.

Supplies overstated $130 & Fees Earned overstated by $130

Which of the following purposes would financial statements serve for external users? A. To find information about projected costs and revenues of proposed products. B. To assess employee performance and compensation. C. To assist in monitoring consumer needs and price concerns. D. To fulfill regulatory requirements for companies whose stock is sold to the public. E. To determine purchasing needs.

To fulfill regulatory requirements for companies whose stock is sold to the public

A corporation has a $40,000 credit balance in the Income Tax Payable account. Period end information shows that the actual liability is $47,000. The company should record an entry to debit Income Tax Expense for $7,000 and credit Income Taxes Payable for $7,000. TRUE or FALSE?

True

All of the following statements regarding liabilities are true except: A. A liability is a probable future payment of assets or services. B. Unearned future wages to be paid to employees should be recorded as liabilities. C. For a liability to be reported, it must be a present obligation that results from a past transaction or event, and requires a future payment of assets or services. D. Information about liabilities is more useful when the balance sheet identifies them as either current or long term. E. Liabilities can involve uncertainty in whom to pay.

Unearned future wages to be paid to employees should be recorded as liabilities.

A set of procedures and approvals for verifying, approving and recording obligations for eventual cash disbursement, and for issuing checks for payment only of verified, approved, and recorded obligations is referred to as a(n): A. Internal cash system. B. Petty cash system. C. Cash disbursement system. D. Voucher system. E. Cash control system.

Voucher System

A credit is used to record an increase in all of the following accounts except: A. Accounts Payable B. Service Revenue C. Unearned Revenue D. Wages Expense E. Common Stock

Wages Expense

All of the following statements related to recording warranty expense are true except: A. Recording estimated warranty expense complies with the full disclosure principle. B. Warranty expense should be recorded in the period when the warranty service is performed. C. Recording estimated warranty expense complies with the matching principle. D. The seller reports a warranty obligation as a liability. E. Warranty costs are probable and the amount can be estimated.

Warranty expense should be recorded in the period when the warranty service is performed.

Goods in transit are included in a purchaser's inventory: A. At any time during transit. B. When the purchaser is responsible for paying freight charges. C. When the supplier is responsible for freight charges. D. If the goods are shipped FOB destination. E. After the half-way point between the buyer and seller.

When purchaser is responsible for paying freight charges

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 debt expense?

bad debts expense 16,125 Allowance for doubtful accounts 16,125

If goods are shipped FOB shipping point, the seller does not record revenue from the sale until the goods arrive at their destination because the transaction is not complete until that point. True or False?

false

If obsolete or damaged goods can be sold, they will be included in inventory at their original cost. True or False?

false