ACCT FINAL
Hale Company sells merchandise on account for $1,000 to Long Company with credit terms of 2/10, n/30. Long Company returns $200 of merchandise that was damaged along with a check to settle the account within the discount period. What is the amount of the check?
$1,000 - $200 = $800; $800 X 98% = $784. ANSWER IS $784
As of December 31, Stoneland Company has assets of $3,500 and stockholders' equity of $2,000. What are the liabilities for Stoneland Company as of December 31?
$1,500.
Amount of interest due on a $10,000, 8%, 90-day note at maturity is
$10,000 x 8% x 3/12 = $200. ANSWER IS 200
Oriole has the following inventory information. JULY 1) Beginning Inventory, 15 units at $18, $270 7) Purchases, 75 units at $20, 1500 22) Purchases, 5 units at $24, 120 Total is $1890 A physical count of merchandise inventory on July 31 reveals that there are 40 units on hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for July is
$1120.
Bibi's Beach Boutique does not ring up sales tax separately. If the sales tax rate is 5% and the total receipts amounted to $126,000, what is the amount of the sales taxes owed to the taxing agency?
$126,000/1.05 = $120,000 of sales. Therefore, the sales tax payable = $126,000 - $120,000 = $6,000. answer is 6000
A company just starting business made the following four inventory purchases in June. Date Purchases Sales June 1 100 units $400 June 10 250 units 570 June 15 250 680 June 28 100 500 total: 2150 cost A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for June is
$1378.
Company Crane sells $1700 of merchandise on account to Company Wildhorse with credit terms of 1/10, n/30. If Company Wildhorse remits a check taking advantage of the discount offered, what is the amount of Company Wildhorse's check?
$1683
Marigold Shutters has the following inventory information. Nov 1) Inventory, 50 units @ $4.00 8) Purchase, 160 units @ $5.00 17) Purchase, 70 units @ $6.00 25) Purchase, 80 units @ $7.00 A physical count of merchandise inventory on November 30 reveals that there are 40 units on hand. Assume a periodic inventory system is used. Cost of goods sold (rounded to the nearest dollar) under the average-cost method is
$1760.
Vaughn Company's inventory records show the following data: Date UNIT UNIT COST INVENT JAN 1 10100 $9.40 PURCH June 18 9400 8.00 Nov 8 6500 8.00 A physical inventory on December 31 shows 4300 units on hand. Vaughn sells the units for $14 each. The company has an effective tax rate of 22%. Vaughn uses the periodic inventory method. Under the LIFO method, cost of goods sold is
$181720.
Swifty's Place recorded the following data: 1. Date 2. Received 3. Sold 4. On Hand 5. United cost 1) 1/1 Inventory 4.\) 500 5) $2.10 1) 1/8 2)1000 4)1500 5) 3.00 1)1/12 sold 3) 1160 4) 340 Swifty's Place recorded the following data:
$2.70.
Ginter Co. holds Kolar Inc.'s $10,000, 120-day, 9% note. The entry made by Ginter Co. when the note is collected, assuming no interest has been previously accrued, is
$300 ($10,000 x .09 x 4/12). debit Cash10,300 CREDIT Notes Receivable 10,000 CREDIT Interest Revenue 300
Crane Bookstore had 480 units on hand at January 1, costing $9 each. Purchases and sales during the month of January were as follows: Date Purchases Sales Jan. 14 390@$13 17 250@ $8 25 250@ $11 29 220@$15 Crane does not maintain perpetual inventory records. According to a physical count, 370 units were on hand at January 31. The cost of the inventory at January 31, under the LIFO method is:
$3330.
Sunland Company developed the following information about its inventories in applying the lower-of-cost-or-net realizable value (LCM) basis in valuing inventories. Product, Cost, Net realizable value A, $122,000, $114,000 B, 84,000, 77,000, C, 158,000, 165000 If Sunland applies the LCNRV basis, the value of the inventory reported on the balance sheet would be
$349000.
Martha Beyerlein Company incurred $150,000 of research and development costs in its laboratory to develop a patent that was granted on January 2, 2022. On July 31, 2022, Beyerlein paid $35,000 for legal fees in a successful defense of the patent. The total amount debited to Patents through July 31, 2022 for these costs should be
$35,000.
In preparing its bank reconciliation for the month of April 2021, Bonita, Inc. has available the following information. Balance per bank statement 4/30/21) $41220 NSF check returned with 4/30/21 bank statement) 1300 Deposits in transit 4/30/21) 10300 Outstanding checks, 4/30/21) 15800 Bank service charges for April) 80 What should be the adjusted cash balance at April 30, 2021?
$35720.
Bramble Company provides for bad debt expense at the rate of 3% of accounts receivable. The following data are available for 2021: Allowance for doubtful accounts, 1/1/21 (Cr.)$ 13200 Accounts written off as uncollectible during 2021 10500 Ending accounts receivable 1212000 The Allowance for Doubtful Accounts balance at December 31, 2021, should be
$36360.
Sunland Bookstore had 480 units on hand at January 1, costing $9 each. Purchases and sales during the month of January were as follows: Date Purchases Sales Jan. 14 425@$13 17 280@ $8 25 280@ $10 29 220@ $15 Sunland does not maintain perpetual inventory records. According to a physical count, 395 units were on hand at January 31. The cost of the inventory at January 31, under the FIFO method is:
$3720.
During 2022, Concord Enterprises generated revenues of $97000. The company's expenses were as follows: cost of goods sold of $43000, operating expenses of $15000 and a loss on the sale of equipment of $2900. Concord's income from operations is
$39000.
Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $32300. If the balance of the Allowance for Doubtful Accounts is $7670 debit before adjustment, what is the amount of bad debt expense for that period?
$39970
If the month-end bank statement shows a balance of $54800, outstanding checks are $14500, a deposit of $5400 was in transit at month end, and a check for $900 was erroneously charged by the bank against the account, the correct balance in the bank account at month end is
$46600.
Hughes Company has a credit balance of $5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. Based on the review and aging of its accounts receivable at the end of the year, Hughes estimates that $60,000 of its receivables are uncollectible. The amount of bad debt expense which should be reported for the year is
$55,000.
The Cash account had a normal balance of $48,000 at the beginning of the month. During the month, Langdon Company received cash payments from its customers of $22,000 and made cash payments of $8,000 for expenses incurred and $6,000 on account. The balance in the Cash account after posting these transactions is (+48,000)(+22000 )(-8000)(-6000)
$56,000 debit balance.
Equipment was purchased for $60,000. Freight charges amounted to $2,800 and a cost of $8,000 was incurred for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be
$60,000 + $2,800 + $8,000 - $12,000 = $58,800.; $58,800/5 years = $11,760 annual depreciation using the straight-line method. answer is $11760
Joe's Copy Shop bought equipment for $60,000 on January 1, 2022. Joe estimated the useful life to be 3 years with no salvage value. The straight-line method of depreciation will be used. On January 1, 2023, Joe decides that the business will use the equipment for a total of 5 years. What is the revised depreciation expense for 2023?
$60,000/3 years = $20,000 annual depreciation. The book value on January 1, 2023 is $40,000. $40,000/4 remaining years = $10,000 revised depreciation expense for 2023. ANSWER IS $10,000
Concord's Market recorded the following events involving a recent purchase of merchandise: Received goods for $67000, terms 1/10, n/30 Returned $1200 of the shipment for credit. Paid $300 freight on the shipment. Paid the invoice within the discount period. As a result of these events, the company's inventory increased by
$65442.
Sanders Company has a debit balance of $7,000 in its Allowance for Doubtful Accounts before any adjustments are made. Based on a review of its accounts receivable at the end of the year, Sanders estimates that $70,000 of its receivables are uncollectible. The amount of bad debt expense which should be reported for the year is
$77,000.
In preparing its bank reconciliation for the month of April 2021, Bonita, Inc. has available the following information. Balance per bank statement 4/30/21) $78500 NSF check returned with 4/30/21 bank statement) 970 Deposits in transit 4/30/21) 10200 Outstanding checks, 4/30/21) 10800 Bank service charges for April) 40 What should be the adjusted cash balance at April 30, 2021?
$77900.
Clark Real Estate signed a four-month note payable in the amount of $8,000 on September 1. The note requires interest at an annual rate of 12%. The amount of interest to be accrued at the end of September is
$8,000 X .12 X 1/12 = $80. THE ANSWR IS $80
Gentry Company's land account decreased $120,000 because of a cash sale for $120,000, its equipment account increased $40,000 as a result of a cash purchase, and its bonds payable account increased $130,000 from the issuance of bonds for cash at face value. The net cash provided by investing activities is
$80,000.
Sheffield Company purchased merchandise inventory with an invoice price of $10200 and credit terms of 5/10, n/30. What is the net cost of the goods if Sheffield Company pays within the discount period?
$9690
A truck which had an original cost of $72,000 and accumulated depreciation of $11,000 was sold for $57,000. The journal entry to record the sale will include a
($61,000 = $72,000 - $11,000) (61,000-57,000) answer is debit to Loss on Disposal for $4,000.
If a check written and paid by the bank for $638 is incorrectly recorded on the company's books at $683, the appropriate treatment on the bank reconciliation would be to
($683 - $638 = $45) add $45 to the book balance.
Hudson Company started its year with 600 units of beginning inventory at a cost of $4 per unit. During the year, the company made the following purchases: May, 900 units at $5 per unit and July, 500 units at $6 per unit. A physical count of inventory at year-end indicates that there are 700 units in ending inventory. What is the cost of the ending inventory if Hudson Company uses the FIFO method for valuing inventory?
(500 units x $6) + (200 units x $5) = $4,000. ANSWER IS 4000
Bennie Razor Company has decided to sell one of its old manufacturing machines on June 30, 2022. The machine was purchased for $80,000 on January 1, 2018, and was depreciated on a straight-line basis for 10 years assuming no salvage value. If the machine was sold for $26,000, what was the amount of the gain or loss recorded at the time of the sale?
. The accumulated depreciation as of June 30, 2022 is $36,000 or [($80,000/10) x 4.5 years]. Thus, the cost of the machine less accumulated depreciation equals $44,000 or ($80,000 - $36,000). The loss recorded at the time of sale is $18,000 = $26,000 - $44,000. ANSWER IS ($18,000)
The closing process involves separate entries to close expenses, dividends, revenues, and income summary. The correct sequencing of the entries is
1. REVENUES 2. EXPENSES 3. INCOME SUMMARY 4. DIVIDENDS
Adjusting entries are made to ensure that
1. expenses are recognized in the period in which they are incurred. 2. revenues are recorded in the period in which services are performed. 3. revenues are recorded in the period in which services are performed. (CORRECT) all of these answer choices are correct.
The proper order of the following steps in the accounting cycle is
1.journalize transactions 2. post to ledger accounts 3. prepare unadjusted trial balance 4. journalize and post adjusting entries.
A company shows the following balances: Sales Revenue $2449000 Sales Returns and Allowances 409000 Sales Discounts 40000 Cost of Goods 1430000 What is the gross profit rate?
28.5%
The average collection period is computed by dividing
365 days by the accounts receivable turnover.
The BASE Company has assets, other than investment securities, that cost $50 million. The current market value of the assets is $75 million. The assets will be recorded and reported as assets at
50 million
Tinker Bell Company has the following: Units Unit Cost Inventory, Jan. 18,000 $11 Purchase, June 19 13,000 12 Purchase, Nov. 85,000 13 If Tinker Bell has 9,000 units on hand on December 31, the cost of the ending inventory under LIFO is
8,000 units from the inventory at Jan. 1 and 1,000 units from the June 19 purchase. (8,000 X $11) + (1,000 X $12), or $100,000. ANSWER IS 100,000
The debit and the credit columns of a trial balance each total $80,000. Which error may still exist?
A cash payment on account of $450 is incorrectly recorded as a cash payment on account of $540.
The entry to record the receipt of payment within the discount period on a sale of $3400 with terms of 2/10, n/30 will include a credit to
Accounts Receivable for $3400.
When an account becomes uncollectible and must be written off,
Accounts Receivable should be credited.
Which of the following is in accordance with generally accepted accounting principles?
Accrual-basis accounting
Dewitt Company gathered the following information in preparing its bank reconciliation on May 31: Cash balance per books, May 31, $3,500; deposits in transit, $1,150; note and interest collected by the bank, $850; bank service charge, $20; outstanding checks, $2,500; NSF check, $170. The adjusted cash balance per books at May 31 is
Adjusted cash balance per books = Cash balance per books, May 31 ($3,500) + note and interest collected ($850) - bank service charge ($20) - NSF check ($170) = $4,160. $4,160.
All of the following are advantages of bond financing over common stock except
All of the following are advantages of bond financing over common stock except
Writing off an uncollectible account under the allowance method requires a debit to
Allowance for Doubtful Accounts
The balance of the Allowance for Doubtful Accounts account at January 1 of the current year was $6,800 credit. During the year, accounts receivable in the amount of $9,000 were written off. Estimated uncollectible accounts expense for the year amounts to $7,200. The balance of the Allowance for Doubtful Accounts account to be reported on the balance sheet at year-end is
Allowance for Doubtful Accounts = beginning balance for Allowance for Doubtful Accounts ($6,800 credit) - current year write-offs ($9,000 debit) + current year estimated Uncollectible Accounts Expense ($7,200 credit) = $5,000. answer is 5000
Which of the following events is not recorded in the accounting records?
An employee is terminated.
Equipment was purchased for $800,000 on January 1, 2022. It has an estimated useful life of 8 years and a salvage value of $120,000. Depreciation is being computed using the straight-line method. What amount should be shown for the Equipment, net of accumulated depreciation, in the company's 2023 balance sheet?
Annual depreciation expense = Cost ($800,000) - salvage value ($120,000) / useful life (8 years) = $85,000. Accumulated depreciation, 2022 - 2023 = Annual depreciation expense ($85,000) x 2 years = $170,000. Amount of Equipment, net of accumulated depreciation at December 31, 2023 = Cost of equipment ($800,000) - accumulated depreciation, 2022 - 2023 ($170,000) = $630,000. ANSWER IS $630,000
For the current year, Lake Coffee Company reported net sales of $180,000, net income of $54,000, beginning total assets of $200,000, and ending total assets of $300,000. What was the company's asset turnover?
Asset turnover is Net Sales/Average Total Assets or 0.72 times or ($180,000/ [$200,000 + $300,000/2]). answer is .72 times
Euler Company made an inventory count on December 31, 2021. During the count, one of the clerks made the error of counting an inventory item twice. For the balance sheet at December 31, the effects of this error are
Assets: overstated Liabilities: no effect Stockholder's Equity: overstated
What is the impact on the financial statements if the adjusting entries for prepaid expenses are omitted?
Balance sheet accounts are overstated and income statement accounts are understated.
If beginning inventory is $60,000, cost of goods purchased is $380,000, and ending inventory is $50,000, cost of goods sold is
Beginning inventory $60,000 + cost of goods purchased $380,000 - ending inventory $50,000 = $390,000 cost of goods sold. ANSWER IS $390,000
Which of the following statements is true regarding bonds?
Bond issuance must be approved by the board of directors. Bond terms are set forth in a legal document called a bond indenture. The contractual interest rate on a bond is also referred to as the stated rate All of these answer choices are correct. CORRECT ANSWER
Carlos Company had beginning inventory of $80,000, ending inventory of $110,000, cost of goods sold of $285,000, and sales revenue of $475,000. Carlos's days in inventory is
Carlos's Days in Inventory is 121.7 days, or 365/Inventory Turnover = 365/ ($285,000/ ($80,000 + $110,000)/2)). ANSWR IS 121.7 DAYS
Cecil gives goods on consignment to Jerry who agrees to try to sell them for a 20% commission. At the end of the accounting period, which of the following parties includes the consigned goods in its inventory?
Cecil (company who gives on consignment)
Which of the following is not a long-term liability?
Current maturities of long-term debt
The entry to record the proceeds upon issuing an interest-bearing note is
DEBIT CASH CREDIT NOTES PAYABLE
Queenan Company computes depreciation on equipment at $1,000 for the month of June. The adjusting entry to record this depreciation is as follows
DEBIT Depreciation Expense 1000 CREIDT Accumulated Depreciation Equipment 1000
Foti Co. accepts a $1,000, 3-month, 12% promissory note in settlement of an account with Bartelt Co. The entry to record this transaction is as follows:
DEBIT Notes Receivable 1000 CREDIT Account Receivable 1000
Kathy Siska earned a salary of $400 for the last week of September. She will be paid on October 1. The adjusting entry for Kathy's employer at September 30 is
DEBIT Salaries and Wages Expense 400 Credit Salaries and Wages Payable 400
Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjusting entry:
DR Account Receivable Cr Cash
Marigold Company sells merchandise on account for $4600 to Cullumber Company with credit terms of 1/10, n/30. Cullumber Company returns $400 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Marigold Company make upon receipt of the check?
DR Cash 4158 DR Sales Returns and Allowances 400 DR Sales Discounts 42 CR Account receivable 4600
When the physical count of Concord Company inventory had a cost of $4410 at year end and the unadjusted balance in Inventory was $4650, Concord will have to make the following entry:
DR Cost of Goods Sold 240 CR Inventor 240
Concord Company uses a perpetual inventory system and purchased inventory from Ivanhoe Company. The shipping costs were $570 and the terms of the shipment were FOB shipping point. Concord would have the following entry regarding the shipping charges:
DR Inventory 570 CR CASH 570
Vaughn Company uses the percentage of receivables method for recording bad debt expense. The accounts receivable balance is $599000 and credit sales are $2640000. Management estimates that 3% of accounts receivable will be uncollectible. What adjusting entry will Vaughn Company make to record bad debt expense if the Allowance for Doubtful Accounts has a $5200 credit balance before adjustment?
Debit Bad Expense 12770 Credit Allowance for Doubtful Account 12770
Under the indirect method of preparing the statement of cash flows, which of the following is added to net income in the operating activities section
Depreciation expense
Each of the following accounts is closed to Income Summary except
Dividends
In periods of rising prices, the inventory cost flow method which results in the inventory value on the balance sheet that is closest to current cost is the
FIFO method.
The cost flow method that often parallels the actual physical flow of merchandise is the
FIFO method.
Which of the following is not a payroll deduction?
Federal unemployment taxes.
The primary accounting standard-setting body in the United States is the
Financial Accounting Standards Board.
Under the indirect method of preparing the operating section of the statement of cash flows, which of the following is deducted from net income in the operating activities section?
Gain on disposal of land
GAAP stands for
Generally Accepted Accounting Principles.
Which of the following should be included in the physical inventory of a company?
Goods in transit from another company shipped FOB shipping point.
If disposal of a plant asset occurs during the year, depreciation is
If disposal of a plant asset occurs during the year, depreciation is
The investment of cash by the stockholder
Increases stockholders' equity.
If a purchaser using a perpetual system agrees to freight terms of FOB shipping point, then the
Inventory account will be increased.
Suppose at December 31 of a recent year, the following information (in thousands) was available for sunglasses manufacturer Oakley, Inc.: ending inventory $160,000, beginning inventory $129,000, cost of goods sold $286,110, and sales revenue $777,000. Calculate the inventory turnover for Oakley, Inc Calculate days in inventory for Oakley, Inc.
Inventory turnover is 1.98 times Days in Inventory is 184 days
The following information is available for Tye Company at December 31: Beginning inventory $80,000; Ending inventory $120,000; Cost of goods sold $1,200,000; and Sales revenue $1,600,000. Tye's inventory turnover is
Inventory turnover is calculated by dividing cost of goods sold by average inventory ($1,200,000/(($80,000 + $120,000) /2) = 12 times). ANSWER IS 12 TIMES
A buyer would record a payment within the discount period under a perpetual inventory system by crediting
Inventory.
In a perpetual inventory system, a return of defective merchandise by a purchaser is recorded by crediting
Inventory.
The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit
Inventory.
Which of the following is an example of a cash flow from a financing activity?
Issuance of debt for cash
Which of the following statements related to the adjusted trial balance is incorrect?
It is prepared before adjusting entries have been made.
Which of the following is incorrect about the statement of cash flows?
It reconciles the ending cash account balance to the balance per the bank statement.
The maturity date of a 90-day note dated April 12 is
July 11.
On June 30, a printing shop provides $1,000 of services to a customer to custom print restaurant menus. The customer is sent a bill on July 5 for the amount due. A check in the amount of $1,000 is received from the customer on July 25. The printing shop follows GAAP and applies the revenue recognition principle. When is the $1,000 revenue recognized?
June 30.
The first costs assigned to ending inventory are the costs of the beginning inventory under the
LIFO method.
On February 1, Kline Company received a $6,000, 10%, four-month note receivable. The cash to be received by Kline Company when the note becomes due is
Maturity value = face value + total interest. Interest = $6,000 X 10% X 4/12 = $200. Therefore, maturity value = $6,000 + $200 = $6,200. ANSWER IS 6200
investing, financing, and operating.
Payment of cash to lenders for interest
Which of the following depicts the proper sequence of steps in the accounting cycle?
Prepare a trial balance, prepare adjusting entries, prepare financial statements.
Which one of the following amounts increases each period when accounting for long-term mortgage payable?
Reduction of principal
Which of the following statements about the accrual-basis of accounting is false?
Revenue is recorded only when cash is received, and expense is recorded only when cash is paid.
The amount of sales tax collected by a retailer is recorded in the
Sales Taxes Payable account.
An account that will have a zero balance after closing entries have been journalized and posted is
Service Revenue.
Oliveras Company had net credit sales during the year of $800,000 and cost of goods sold of $500,000. The balance in accounts receivable at the beginning of the year was $100,000, and at the end of the year, it was $150,000. What were the accounts receivable turnover and the average collection period in days?
The accounts receivable turnover is 6.4 [Sales $800,000/average accounts receivable (($100,000 + $150,000)/2)] and the average collection period in days is 57 days (365/accounts receivable turnover 6.4). ANSWER IS 6.4 AND 57 DAYS
Before posting a payment of $5,000, the Accounts Payable of Senator Company has a normal balance of $16,000. The balance after posting this transaction was
The balance is $11,000 = $16,000 (normal balance) - $5,000 (payment). answer is: $11,000.
Davidson Electronics has the following: UNITS UNIT COST Inventory, Jan. 1 5,000 $8 Purchase, April 2 15,000 10 Purchase, Aug. 28 20,000 12 If Davidson has 7,000 units on hand at December 31, the cost of ending inventory under the average-cost method is
The total cost of goods available is $430,000 = (5,000 X $8) + (15,000 X $10) + (20,000 X $12). The average cost per unit = ($430,000/total units available for sale or 40,000) = $10.75. Therefore, ending inventory is ($10.75 X 7,000) or $75,250. ANSWER IS $75,250.
The income statement for the month of June, 2021 of Teal Enterprises contains the following information: Revenues $6770 Expenses: Salaries and Wages Expense $3010 Rent Expense 1460 Advertising Expense 760 Supplies Expense 310 Insurance Expense 100 Total expenses 5640 Net income $1130 After the revenue and expense accounts have been closed, the balance in Income Summary will be
a credit balance of $1130.
The income statement for the month of June, 2021 of Headland Enterprises contains the following information: Revenues $6650 Expenses: Salaries and Wages Expense $2910 Rent Expense 1560 Advertising Expense 810 Supplies Expense 270 Insurance Expense 90 Total expenses ,5640 Net income $1010 The entry to close Income Summary to Retained Earnings includes
a credit to Retained Earnings for $1010.
The purchase of supplies on account is recorded with
a debit to Supplies and a credit to Accounts Payable.
An accounting time period that is one year in length, but does not begin on January 1, is referred to as
a fiscal year
If a plant asset is retired before it is fully depreciated and no salvage value is received,
a loss on disposal occurs.
The acquisition of land by issuing common stock is
a noncash transaction which is not reported in the body of a statement of cash flows.
A company determines the cost of goods sold each time a sale occurs in
a perpetual inventory system only.
Liabilities of a company would not include
accounts receivable.
Revenues for which services are performed but not yet received in cash or recorded are called
accrued revenues.
Posting
accumulates the effects of journalized transactions in the individual accounts.
If a check correctly written and paid by the bank for $408 is incorrectly recorded on the company's books for $488, the appropriate treatment on the bank reconciliation would be to
add $80 to the book's balance.
On a bank reconciliation, deposits in transit are
added to the bank balance.
On a bank reconciliation, collection of a note receivable by the bank is
added to the book balance.
Under the allowance method, writing off an uncollectible account
affects only balance sheet accounts.
Closing entries are journalized and posted
after the financial statements are prepared.
If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a sales
allowance.
The balance in the Accumulated Depreciation account represents the
amount charged to expense since the acquisition of the plant asset.
The steps in the accounting cycle for a merchandising company are the same as those in a service company except
an additional adjusting journal entry for inventory may be needed in a merchandising company.
If a resource has been consumed but a bill has not been received at the end of the accounting period,
an adjusting entry should be made recognizing the expense.
An adjusting entry always affects
an income statement account and a balance sheet account.
Items that are added back to net income in determining cash provided (used) by operating activities under the indirect method do not include
an increase in inventory.
Current liabilities
are obligations that a company is to pay within the coming year or its operating cycle, whichever is longer.
If a fully depreciated plant asset is still used by a company, the
asset and the accumulated depreciation continue to be reported on the balance sheet without adjustment until the asset is retired.
Asset turnover is Net Sales/Average Total Assets or 0.72 times or ($180,000/ [$200,000 + $300,000/2]).
asset's cost less accumulated depreciation.
The resources a business owns are called
assets
Stockholders' equity is equal to (assets = liabilities + stockholders' equity)
assets minus liabilities.
The historical cost principle states that
assets should be recorded at their cost.
Accounts that normally have debit balances are
assets, dividends, and expenses.
The order in which the accounts are arranged in the ledger is
assets, liabilities, common stock, dividends, revenues, expenses.
Rickety Company purchased 1,000 widgets and has 200 widgets in its ending inventory at a cost of $91 each. The net amount that a company expects to realize from the sale of inventory is $80 per unit. The ending inventory under lower-of-cost-or-net realizable value is
at 200 widgets x $80 each, or $16,000. ANSWER IS $16,000.
All of the financial statements are for a period of time except the
balance sheet
The financial statement that reports assets, liabilities, and stockholders' equity is the
balance sheet.
Journal entries are required by the depositor for all of the following except
bank errors.
Cost of goods sold is computed from the following equation:
beginning inventory + cost of goods purchased - ending inventory.
is used for tax purposes.
best measures the plant asset's contribution to revenue over its useful life.
A gain or loss on disposal of a plant asset is determined by comparing the
book value of the asset with the proceeds received from its sale.
The ending retained earnings amount is shown on the
both the balance sheet and the retained earnings statement.
Freight terms of FOB shipping point mean that the
buyer must bear the freight costs.
FOB shipping point means that the
buyer pays the freight.
Current assets are listed
by liquidity.
Costs incurred to increase the operating efficiency or useful life of a plant asset are referred to as
capital expenditures.
Under cash-basis accounting, companies record revenue only when
cash is received
When an account is written off using the allowance method, the
cash realizable value of total accounts receivable will stay the same.
Companies report accounts receivable on the balance sheet at
cash realizable value.
Sales resulting from the use of Visa and MasterCard credit cards are considered
cash sales.
Closing entries
cause the revenue and expense accounts to have zero balances.
Posting of journal entries should be performed in
chronological order.
A debit is not the normal balance for a(n)
common stock account.
The Sales Discounts account is a(n)
contra revenue account.
Depreciation is a process of
cost allocation.
Depreciable cost is the
cost of an asset less its salvage value.
Beginning inventory plus the cost of goods purchased equals
cost of goods available for sale.
Understating beginning inventory will understate
cost of goods sold
Understating ending inventory will overstate
cost of goods sold.
The income statement for the month of June, 2021 of Flounder Enterprises contains the following information: Revenues $6970 Expenses: Salaries and Wages $2890 Rent Expense 1520 Advertising Expense 840 Supplies Expense 310 Insurance Expense 110 Total Expense 5670 Net Income 1300 The entry to close the revenue account includes a
credit to Income Summary for $6970.
Four-Nine Corporation issued bonds that pay interest every July 1 and January 1. The entry to accrue bond interest at December 31 includes a
credit to Interest Payable.
The income statement for the month of June, 2021 of Pearl Enterprises contains the following information: Revenues $6980 Expenses Salaries and Wages Expense $3030 Rent Expense 1560 Advertising Expense 730 Supplies Expense 290 Insurance expense 110 Total Expenses 5720 Net Income 1260 The entry to close the expense accounts includes as part of the entry
credit to Rent Expense for $1560.
The respective normal account balances of Sales Revenue, Sales Returns and Allowances, and Sales Discounts are
credit, debit, debit.
A deposit made by a company will appear on the bank statement as a
credit.
When a net loss has occurred, Income Summary is
credited and Retained Earnings is debited.
The current ratio is
current assets divided by current liabilities.
Working capital is
current assets minus current liabilities.
Assets that a company expects to convert to cash or use up within one year or the operating cycle, whichever is longer are called
current assets.
In a classified balance sheet, assets are usually classified using the following categories:
current assets; long-term investments; property, plant, and equipment; and intangible assets.
Salaries and Wages Payable is classified as a
current liability.
Cash of $100 received at the time the service was provided was journalized and posted as a debit to Cash $100 and a credit to Accounts Receivable $100. Assuming the incorrect entry is not reversed, the correcting entry is
debit Accounts Receivable $100 and credit Service Revenue $100.
A company that maintains a perpetual inventory system has an inventory account balance of $50,000. The physical count of goods on hand totals $49,600. Which of the following adjusting entries is correct?
debit Cost of Goods Sold and credit Inventory.
Income Summary has a credit balance of $12,000 after closing revenues and expenses. The entry to close Income Summary is
debit Income Summary $12,000, credit the Retained Earnings account $12,000.
Rider Company is in the process of preparing closing entries. It first closes its revenue accounts by crediting the Income Summary account for $68,000 and then, closes its expense accounts by debiting the Income Summary account for $45,000. The entry to then close the Income Summary account is
debit Income Summary, $23,000, and credit Retained Earnings, $23,000.
A company that receives an interest-bearing note receivable will
debit Notes Receivable for the face value of the note.
White Laundry Company purchased $6,500 of supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the supplies indicated only $3,000 on hand. It is the company's first period of operations. The adjusting entry that should be made by the company on June 30 is
debit Supplies Expense, $3,500; credit Supplies, $3,500. $3,500 ($6,500 - $3,000) of supplies was used during the current period; therefore the adjusting entry is to debit Supplies Expense and credit Supplies for $3,500.
Whitman Company paid $630 cash on account to a creditor. The transaction was incorrectly recorded as a debit to Cash of $360 and a credit to Accounts Receivable of $360. The correcting entry is
debit to Accounts Payable, $630, debit to Accounts Receivable, $360, and credit to Cash, $990 ($360 + $630).
To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a
debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts.
An aging of a company's accounts receivable indicates that $15800 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1210 credit balance, the adjustment to record bad debts for the period will require a
debit to Bad Debt Expense for $14590.
The collection of a $8000 account within the 1 percent discount period will result in a
debit to Sales Discounts for $80.
The depreciation method that produces a decreasing annual depreciation expense over an asset's useful life is the
declining-balance method.
The method that ignores salvage value in determining the amount of depreciation until the final year of the asset's useful life is the
declining-balance method.
Adjustments for prepaid expenses
decrease assets and increase expenses.
When an account is written off using the allowance method, accounts receivable
decreases and the allowance account decreases.
Payment of accounts payable affects the components of the accounting equation in the following way:
decreases assets and decreases liabilities.
When converting net income to net cash provided (used) by operating activities under the indirect method,
decreases in inventory and increases in accrued liabilities are added.
If a check correctly written and paid by the bank for $560 is incorrectly recorded on the company's books for $506, the appropriate treatment on the bank reconciliation would be to
deduct $54 from the book's balance.
On a bank reconciliation, outstanding checks are
deducted from the bank balance.
In a bank reconciliation, a bank service charge is
deducted from the book balance.
The collection of an account that had been previously written off under the allowance method of accounting for uncollectibles
does not affect income in the period it is collected.
In preparing closing entries
each expense account will be credited.
Combining the activities of Kellogg and General Mills would violate the
economic entity assumption.
Adjusting entries are required
every time financial statements are prepared.
The principle or assumption dictating that expenses be matched with revenues is the
expense recognition principle.
The adjusting entry for accrued expenses affects
expenses and liabilities.
Employer payroll taxes do not include
federal income taxes.
Cash dividends paid to stockholders are classified on the statement of cash flows as
financing activities.
The term "FOB" denotes
free on board.
All of the following items would be reported as other expenses and losses except
freight-out.
A measure that describes the cash remaining from operating activities after adjustment for capital expenditures and dividends is the
fresh cash flow
Cost of goods available for sale consists of two elements: the cost of beginning inventory and the cost of
goods purchased
Sales Returns and Allowances is increased when
goods that were sold on credit are returned.
If the company issues a $100,000, 12%, 10-year bond that pays interest semiannually when the market interest rate is 10%, the bond would sell at an amount that is
greater than face value.
$35720.
have been recorded on the company's books but not yet by the bank.
The first activity of the accounting process is
identification
The calculation of depreciation using the declining balance method,
ignores salvage value in determining the amount to which a constant rate is applied
The double-entry system requires that each transaction must be recorded
in at least two different accounts.
Freight costs paid by a seller on merchandise sold to customers will cause an increase
in operating expenses for the seller.
Closing entries are made
in order to transfer net income (or loss) and dividends to the retained earnings account.
A loss on disposal of a plant asset is reported in the financial statements
in the Other Expenses and Losses section of the income statement.
During 2022, Gibson Company's assets decreased $50,000 and its liabilities decreased $90,000. Its stockholders' equity therefore
increased $40,000
A credit to a liability account
indicates an increase in the account.
A debit balance in the Allowance for Doubtful Accounts
indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.
Patents and copyrights are
intangible assets.
All of the following would involve a debit memorandum except
interest earned.
Each payment on a mortgage consists of
interest on the unpaid balance of the loan and a reduction of loan principal.
Cash flow activities that include acquiring and disposing of investments and property, plant, and equipment are classified as
investing activities.
The statement of cash flows classifies cash receipts and cash payments by these activities:
investing, financing, and operating.
The Discount on Bonds Payable account
is a contra account.
The Accumulated Depreciation account
is a contra asset account with a credit balance.
A trial balance
is a list of accounts with their balances at a given time?
The income summary account
is a temporary account.
The left side of an account
is always the debit side.
The Premium on Bonds Payable account
is considered to be a reduction in the cost of borrowing.
A revenue accounts
is increased by credits.
The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method which
is used for tax purposes.
Closing entries are
journalized in the general journal.
Entering transaction data in the journal is known as
journalizing.
Plant assets decline in service potential over their useful lives except for
land
Companies amortize the cost of a patent over its
legal life or its useful life, whichever is shorter.
The factor which determines whether or not goods should be included in a physical count of inventory is
legal title.
If the adjusting entry for unearned revenues is not made
liabilities will be overstated.
The Unearned Service Revenue account is a(n)
liability.
The chart of accounts is a
listing of the accounts and the account numbers that identify their location in the ledger.
The time period for classifying a liability as current is one year or the operating cycle, whichever is
longer
In a period of rising prices, FIFO will result in
lower cost of goods sold than LIFO.
In periods of rising prices, LIFO will produce
lower net income than FIFO.
When the allowance method is used to account for uncollectible accounts, Bad Debt Expense is debited when
management estimates the amount of uncollectibles.
When a note receivable is honored, Cash is debited for the note's
maturity value.
Under the lower-of-cost-or-net realizable value basis in valuing inventory, net realizable value is the
net amount a company expects to receive from the sale of inventory.
The accounts receivable turnover is computed by dividing
net credit sales by average net accounts receivable.
When the net realizable value of inventory is less than its cost, it is written down to
net realizable value.
A check returned by the bank marked "NSF" means
not sufficient funds.
Which section of the statement of cash flows provides the best measure of a company's ability to generate sufficient net cash flows to continue as a going concern?
operating activities.
Each of the following items affect the cash balance per books except
outstanding checks.
Harold Company overstated its ending inventory by $15,000 at December 31, 2021. It did not correct the error in 2021 or 2022. As a result, Harold's stockholders' equity was
overstated at December 31, 2021, and properly stated at December 31, 2022.
Atlantis Company's ending inventory is understated by $4,000 at the end of the current year. The effects of this error on the current year's cost of goods sold and net income, respectively, are
overstated, understated
The cost of land includes all of the following except
paving of parking lots.
When recording payroll,
payroll deductions are recorded as liabilities.
A post-closing trial balance will contain only
permanent accounts.
The primary purpose of a trial balance is to
prove that the debits equal the credits after posting.
Under a perpetual inventory system,
purchases on account are debited to Inventory.
When the terms of sale are FOB destination, ownership of the goods remains with the seller until the goods
reach the buyer.
Financial information that is capable of making a difference in a decision is
relevent
All of the following are intangible assets except (copy rights, good will, patents)
research and development costs.
In order to close the dividends account, the
retained earnings account should be debited.
Net income will result during a time period when
revenues exceed expenses.
If cash received for future services is initially recorded in revenue accounts and the company has not yet performed all of the required services at the end of the accounting period, then failure to make an adjusting entry will cause
revenues to be overstated.
Gross profit is
sales revenue less cost of goods sold.
All of the following items would be reported as other revenues and gains for a merchandiser except
sales revenue.
Prepaid expenses are
shown on the balance sheet as assets.
Perpetual inventory system records
sometimes do not match up with physical inventory due to theft and data entry errors.
Generally Accepted Accounting Principles are
standards that indicate how to report economic events.
Closing entries are necessary for
temporary accounts only.
Goods in transit should be included in the inventory of the buyer when the
terms of sale are FOB shipping point.
A change in the estimated useful life of equipment requires
that the amount of periodic depreciation be changed in the current year and in future years.
In recording an accounting transaction in a double-entry system
the amount of the debits must equal the amount of the credits.
After closing entries are posted, the balance in the retained earnings account in the ledger will be equal to
the amount of the retained earnings reported on the balance sheet.
Under the allowance method of accounting for uncollectible accounts,
the cash realizable value of accounts receivable in the balance sheet is the same before and after an account is written off.
The time period assumption states that
the economic life of a business can be divided into artificial time periods.
Accounts receivable are reported in the current assets section of the balance sheet at
the gross amount less allowance for doubtful accounts.
The balance in the income summary account before it is closed will be equal to
the net income or loss on the income statement.
If goods in transit are shipped FOB destination
the seller has legal title to the goods until they are delivered.
An account will show a debit balance if the
the total of the debit amounts exceeds the total credit amounts.
If an account is collected after having been previously written off,
there will be both a debit and a credit to accounts receivable.
Companies record an expense under cash-basis accounting only when
they disburse cash.
Accountants refer to an economic event that affects a company's financial statements as a
transaction
To record the sale of goods for cash in a perpetual inventory system,
two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory.
The relationship between current liabilities and current assets is
useful in evaluating a company's liquidity.
Which of the following is not a step in the accounting process? (Communication, recording & identification)
verification
Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is debited
when an account is determined to be uncollectible.
The revenue recognition principle dictates that revenue should be recognized in the accounting records
when the performance obligation is satisfied.
In a perpetual inventory system, cost of goods sold is recorded
with each sale.
Inventory items on an assembly line in various stages of production are classified as
work in process.
The interest rate specified in a note is for a
year
