ACCT2001 Exam 2

The annual depreciation taken on a vehicle totals $3700. The vehicle has been in service for two full years and the adjusting entries have been completed for the year. At the end of the second year, the balance in the Depreciation Expense account is $________ and the balance in the Accumulated Depreciation account is $________. a. $3700; $7400 b. $3700; $3700 c. $7400; $7400 d. $7400; $3700

a. $3700; $7400

Character Company, which uses the perpetual inventory method, purchases different letters for resale. Character had a beginning inventory comprised of seven units at $4 per unit. The company purchased five units at $6 per unit in February, sold seven units in October, and purchased two units at $7 per unit in December.If Character Company uses the LIFO method, what is the cost of goods sold for the year? a. $38 b. $34 c. $44 d. $72

a. $38

Deferred Revenue, which represents the company's obligation to honor gift cards previously issued to customers, totaled $6,400 at the beginning of the year and $9,300 at the end of the year. Customers purchased gift cards amounting to $51,000 during the year. What was the amount of gift cards redeemed by customers during the year? a. $48,100 b. $53,900 c. $66,700 d. $35,300

a. $48,100

Merle Industries had been selling its product for $42 per unit, but recently lowered the selling price to $26 per unit. The company's current inventory consists of 255 units purchased at $38 per unit. The market value of this inventory is currently $24 per unit. At what amount should the company's inventory be reported on the balance sheet? a. $6,120 b. $9,690 c. $6,630 d. $10,710

a. $6,120

Alvarado Company began the current month with inventory costing $21,000, then purchased inventory at a cost of $66,000. The perpetual inventory system indicates that inventory costing $57,000 was sold during the month for $75,000. If an inventory count shows that inventory costing $29,070 is actually on hand at month-end, what amount of shrinkage occurred during the month? a. $930 b. $9,300 c. $30,000 d. $29,061

a. $930

Account Company X Company Y Company Z Cost of goods sold $4,860,000 $9,562,500 $7,368,000 Average Inventory $824,000 $1,067,000 $953,600 What is the average number of days to sell inventory for Company Y? a. 40.7 b. 9.0 c. 47.2 d. 61.9 e. None of the above.

a. 40.7

Which of the following statements about inventory costing methods is correct? a. A change in inventory method is allowed only if it improves the accuracy of the company's financial results. b. During a period of rising prices, LIFO results in a higher income tax expense than does FIFO. c. International Financial Reporting Standards (IFRS) allow the use of LIFO but not FIFO. d. In the U.S., if a company uses LIFO on the income tax return, it may use a different method for financial reporting.

a. A change in inventory method is allowed only if it improves the accuracy of the company's financial results.

A company owes rent at a rate of $6,000 per month. The company pays the rent owed on the tenth of each month for the previous month. At the end of each month, what kind of adjustment is required? a. An accrual adjustment. b. A closing adjustment. c. A deferral adjustment. d. No adjustment.

a. An accrual adjustment.

Which one of the following statements about inventory is not correct? a. An increase in inventory levels is always a sign of inefficiency in inventory management. b. The measurement of inventory affects both the balance sheet and the income statement within an accounting period. c. The ending inventory of one accounting period becomes the beginning inventory of the next d. accounting period. The cost of inventory can vary over time and may be affected by technological innovation.

a. An increase in inventory levels is always a sign of inefficiency in inventory management.

Darlington Company entered into the following business events during its first month of operations. The company uses the perpetual inventory system. 1) The company purchased $13,100 of merchandise on account under terms 4/10, n/30. 2) The company returned $2600 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $20,200 cash. What effect will the return of merchandise to the supplier in event (2) have on Darlington's financial statements? a. Assets and liabilities decrease by $2600. b. None. It is an asset exchange transaction. c. Assets and stockholders' equity decrease by $2600. d. Assets and liabilities decrease by $2496. e. None of these are correct.

a. Assets and liabilities decrease by $2600.

An understatement of the ending inventory balance will cause: a. Cost of goods sold to be overstated and net income to be understated b. Cost of goods sold to be overstated and net income to be overstated c. Cost of goods sold to be understated and net income to be overstated d. Cost of goods sold to be overstated and net income to be correct

a. Cost of goods sold to be overstated and net income to be understated

An understatement of the ending inventory balance will cause: a. Cost of goods sold to be overstated and net income to be understated. b. Cost of goods sold to be overstated and net income to be overstated. c. Cost of goods sold to be understated and net income to be overstated. d. Cost of goods sold to be overstated and net income to be correct.

a. Cost of goods sold to be overstated and net income to be understated.

A company started the year with $3,750 of supplies on hand. During the year the company purchased additional supplies of $2,000 and recorded them as an increase to the Supplies asset. At the end of the year the company determined that only $750 of supplies are still on hand. What is the adjusting journal entry to be made at the end of the period? a. Debit Supplies Expense and credit Supplies for $5,000 b. Debit Supplies and credit Supplies Expense for $750 c. Debit Supplies Expense and credit Supplies for $3,000 d. Debit Supplies and credit Supplies Expense for $2,500

a. Debit Supplies Expense and credit Supplies for $5,000

Assume that no dividends were declared during the current year. Which of the following statements about the effect of a net loss on the closing process is correct? a. If a company has a net loss during the current accounting period, then the ending Retained Earnings will be smaller than the beginning Retained Earnings. b. When closing entries are prepared, Common Stock is debited if a company has a net loss. c. If a company has a net loss, the closing entry will include debits to the revenue accounts, credits to the expense accounts, and a credit to Retained Earnings. d. If a company has a net loss, the amount of revenues to be closed will be greater than the amount of expenses to be closed in the closing process.

a. If a company has a net loss during the current accounting period, then the ending Retained Earnings will be smaller than the beginning Retained Earnings.

Which of the following is the most common wording for a measure of the company's income from regular operating activities, before considering the effects of interest, income taxes, and any nonrecurring items? a. Income from operations b. Income from core operations c. Income from peripheral operations d. Income before interest, taxes, and nonrecurring items

a. Income from operations

Which of the following is the most common wording for a measure of the company's income from regular operating activities, before considering the effects of interest, income taxes, and any nonrecurring items? a. Income from operations b. Income from core operations c. Income from peripheral operations d. Income before interest, taxes, and nonrecurring items

a. Income from operations

Faust Company uses the perpetual inventory system. Faust sold goods that cost $5,500 for $9,000. The sale was made on account. What is the net effect of the sale on the company's financial statements? a. Increase total assets by $3,500 b. Increase total stockholders' equity by $9,000 c. Increase total assets by $5,500 d. Increase total assets by $9,000 e. None of the above

a. Increase total assets by $3,500

Glenrosa Company bought inventory from Monterosa Company, FOB destination. On December 31, the last day of the accounting year, the goods were on a truck owned by Common Carrier, Incorporated, and not expected to arrive until January 2. Which company should include these goods in its December 31 inventory? a. Monterosa Company b. Glenrosa Company c. Common Carrier, Incorporated d. None of them should include these goods in inventory.

a. Monterosa Company

How does an error that results in an overstatement of ending inventory affect the elements of the company's financial statements in the current year? Assets = Liab. + Equity Rev. -Exp. =Net Inc. Cash Flow A. + NA +NA - +NA B.- NA -NA + -NA C.+ NA +NA NA NA+OA D.+ + NANA + -+OA a. Option A b. Option B c. Option C d. Option D e. None of the above

a. Option A

An example of an account that could be included in an accrual adjustment related to revenue is: a. Rent Receivable. b. Interest Payable. c. Deferred Revenue. d. Cash.

a. Rent Receivable

An example of an account that could be included in an accrual adjustment related to revenue is: a. Rent Receivable. b. Interest Payable. c. Deferred Revenue. d. Cash.

a. Rent Receivable.

Hoover Company purchased two identical inventory items. The item purchased first cost $40.00. The item purchased second cost $44.75. Then Hoover sold one of the inventory items for $75. Based on this information, which of the following statements is true? a. The gross margin is $32.63 if Hoover uses the weighted-average cost flow method. b. The ending inventory is $44.75 if Hoover uses the LIFO cost flow method. c. The cost of goods sold is $44.75 if Hoover uses the FIFO cost flow method. d. The cost of goods sold is $40.00 if Hoover uses the LIFO cost flow method. e. None of the above.

a. The gross margin is $32.63 if Hoover uses the weighted-average cost flow method.

An adjustment to ending inventory under the lower of cost or market/net realizable value (LCM/NRV) rule would be least likely to be recorded by a company that sells: a. a household staple like laundry detergent. b. a fad product like Slap Wraps bracelets. c. seasonal items like snow blowers. d. high-tech goods like cell phones.

a. a household staple like laundry detergent.

Before the closing entries are prepared, the Retained Earnings balance in the adjusted trial balance is equal to the balance of that account: a. at the beginning of the period. b. after adding revenues and subtracting expenses but before subtracting dividends. c. at the end of the period. d. at the beginning of the next period.

a. at the beginning of the period.

Before the closing entries are prepared, the Retained Earnings balance in the adjusted trial balance is equal to the balance of that account: a. at the beginning of the period. b. after adding revenues and subtracting expenses but before subtracting dividends. c. at the end of the period. d. at the beginning of the next period.

a. at the beginning of the period.

On December 1, 2022, Shamrock Company received $9,300 from Destiny, Incorporated for rent of an office owned by Shamrock Company. The payment covers the period from December 1, 2022 through February 28, 2023. Shamrock Company recorded this as Deferred Rent Revenue when it was received on December 1. The adjusting entry on December 31 would include a: a. credit to Rent Revenue of $3,100. b. credit to Deferred Rent Revenue of $3,100. c. debit to Rent Revenue of $4,650. d. debit to Deferred Rent Revenue of $4,650.

a. credit to Rent Revenue of $3,100.

One major difference between deferral and accrual adjustments is that deferral adjustments: a. involve previously recorded assets and liabilities, and accrual adjustments involve no previously recorded assets and liabilities. b. are made after financial statements are prepared, and accrual adjustments are made before financial statements are prepared. c. are made annually, and accrual adjustments are made monthly. d. are influenced by estimates of future events, and accrual adjustments are not.

a. involve previously recorded assets and liabilities, and accrual adjustments involve no previously recorded assets and liabilities.

BetterBuy purchases computers from companies like Hewlett Packard and IBM and sells them to consumers. BetterBuy is a: a. merchandising company at the retail level. b. service company. c. merchandising company at the wholesale level. d. manufacturer.

a. merchandising company at the retail level.

Inventory cost consists of purchase price: a. plus freight-in. b. plus freight-out. c. less freight-in. d. less freight-out.

a. plus freight-in.

Broad, Incorporated had a beginning inventory of $50,000 and an ending inventory of $80,000. Its cost of goods sold for the year was $970,000. What was the amount of purchases that it made for the year? a. $940,000 b. $1,000,000 c. $1,050,000 d. $1,060,000

b. $1,000,000

A company uses a perpetual inventory system. On May 1, beginning inventory consists of 10 items at a cost of $10 each. On May 3, 10 items are purchased at $12 each. On May 8, 12 items are sold. On May 15, 10 items are purchased at $14 each. Using the weighted average cost method, cost of goods sold for the month ended May 31 is: a. $230.40 b. $132.00 c. $228.00 d. $144.00

b. $132.00

A company uses a perpetual inventory system. On May 1, beginning inventory consists of 10 items at a cost of $10 each. On May 3, 10 items are purchased at $12 each. On May 8, 12 items are sold. On May 15, 10 items are purchased at $14 each. Using the weighted average cost method, cost of goods sold for the month ended May 31 is: a. $230.40. b. $132.00. c. $228.00. d. $144.00.

b. $132.00.

A company reported the following: Cost of Goods Sold $ 200,000 General, Selling, and Administrative Expenses 52,800 Income Tax Expense 3,600 Inventory 12,000 Net Income 22,560 Sales Revenue 284,000 Sales Discounts 2,720 Sales Returns & Allowances 2,320 What is the amount of income before income taxes? a. $7,600 b. $26,160 c. $10,400 d. $14,000

b. $26,160

Sanchez Company engaged in the following transactions during Year 1: 1) Started the business by issuing $11,100 of common stock for cash. 2) The company paid cash to purchase $6,900 of inventory. 3) The company sold inventory that cost $4,300 for $8,400 cash. 4) Operating expenses incurred and paid during the year, $3,800. Sanchez Company engaged in the following transactions during Year 2: 1) The company paid cash to purchase $9,400 of inventory. 2) The company sold inventory that cost $8,500 for $15,000 cash. 3) Operating expenses incurred and paid during the year, $4,800. Note: Sanchez uses the perpetual inventory system. What is the amount of inventory that will be shown on the balance sheet at December 31, Year 2? a. $900 b. $3,500 c. $16,800 d. $7,800 e. None of the above

b. $3,500

The annual depreciation taken on a vehicle totals $4,800. The vehicle has been in service for three full years and the adjusting entries have been completed for the year. At the end of the third year, the balance in the Depreciation Expense account is $__________ and the balance in the Accumulated Depreciation account is $__________. a. $4,800; $4,800 b. $4,800; $14,400 c. $14,400; $4,800 d. $14,400; $14,400

b. $4,800; $14,400

On June 15, Oakley Incorporated sells inventory on account to Sunglass Hut (SH) for $8,000, terms 3/10, n/30. On June 20, SH returns to Oakley inventory that SH had purchased for $1,700. On June 24, SH completely fulfills its obligation to Oakley by making a cash payment. What is the amount of cash paid by SH to Oakley? a. $8,000 b. $6,111 c. $6,300 d. $6,060

b. $6,111

Alvarado Company began the current month with inventory costing $20,000, then purchased inventory at a cost of $65,000. The perpetual inventory system indicates that inventory costing $56,000 was sold during the month for $74,000. If an inventory count shows that inventory costing $28,080 is actually on hand at month-end, what amount of shrinkage occurred during the month? a. $29,000 b. $920 c. $9,200 d. $28,071

b. $920

Which of the following companies would be least concerned about a low inventory turnover ratio? a. A fish market selling fresh fish. b. A hardware company selling drywall screws. c. A dairy company selling butter and milk. d. A semiconductor company selling microchips.

b. A hardware company selling drywall screws.

Which of the following will happen if the accrual adjusting entry is not made to record an expense incurred but not yet recorded? a. Both expenses and liabilities will be overstated. b. Both expenses and liabilities will be understated. c. Expenses will be understated and liabilities will be overstated. d. Expenses will be overstated and liabilities will be understated.

b. Both expenses and liabilities will be understated.

Which of the following statements is correct? a. Balance sheet accounts are temporary accounts and do retain their balances from one period to the next. b. Income statement accounts are temporary accounts and do not retain their balances from one period to the next. c. Income statement accounts are permanent accounts and do retain their balances from one period to the next. d. Balance sheet accounts are permanent accounts and do not retain their balances from one period to the next.

b. Income statement accounts are temporary accounts and do not retain their balances from one period to the next.

Which of the following is an activity common to the operations of merchandising, manufacturing, and service companies? a. Producing the product b. Incurring operating expenses c. Buying goods or raw materials d. Selling a physical product

b. Incurring operating expenses

In a period of rising prices, the inventory costing method that will cause the company to have the highest cost of goods sold is: a. FIFO b. LIFO c. Weighted average d. Specific identification

b. LIFO

Which of the following transactions does not create a deferral? a. Paying cash to purchase a two-month supply of office supplies. b. Paying cash to employees for wages they have earned. c. Receiving cash from a customer for services to be provided in the future. d. Paying cash to purchase a three-month insurance policy.

b. Paying cash to employees for wages they have earned.

Fare Industries pays salaries and wages every two weeks. Salaries and wages amount to $180 a day and the company has a seven-day work week. On July 31, the company pays wages for the two weeks ending July 24 and recorded the related journal entry. The adjusting journal entry, dated July 31, to record unpaid wages and salaries owed since July 25 through the end of the month will include a debit to: a. Salaries and Wages Payable and a credit to Salaries and Wages Expense for $2,520. b. Salaries and Wages Expense and a credit to Salaries and Wages Payable for $1,260. c. Salaries and Wages Payable and a credit to Cash for $1,260. d. Salaries and Wages Expense and a credit to Salaries and Wages Payable for $2,520.

b. Salaries and Wages Expense and a credit to Salaries and Wages Payable for $1,260.

Which financial statements will be properly stated if the Year 1 ending inventory balance is understated and Year 2 ending inventory is calculated correctly? a. Year 1 balance sheet. b. Year 2 balance sheet. c. Year 1 income statement. d. Year 2 income statement.

b. Year 2 balance sheet.

The perpetual inventory method of tracking inventory is considered superior to the periodic method because the perpetual method: a. makes calculations easier and less technology can be deployed. b. tells what inventory a company should have on hand at any point in time. c. saves a company from ever having to count the goods in inventory. d. is more consistent with how companies calculated inventory in the past.

b. tells what inventory a company should have on hand at any point in time.

Eagle Company reported Salaries and Wages Payable of $1,500 at the beginning of the year and $5,000 at the end of the year. The income statement for the year reported Salaries and Wages Expense of $112,400. How much cash was paid for salaries and wages during the year? a. $105,900 b. $112,400 c. $108,900 d. $107,400

c. $108,900

Beryl Company uses a periodic inventory system and has the following information regarding its inventory: Beginning inventory 400 units @ $15 $6,000 Purchase on January 25600 units @ $169,600 Purchase on March 15400 units @ $176,800 Purchase on October 2800 units @ $1814,400 Goods available for sale $ 36,800 There are 1,000 units in ending inventory. What is the amount of the ending inventory using the LIFO method? a. $6,000 b. $14,400 c. $15,600 d. $17,800

c. $15,600

Monte Vista uses the perpetual inventory system. At the beginning of the quarter, Monte Vista has $48,000 in inventory. During the quarter the company purchases $10,600 of new inventory from a vendor, returned $1,000 of inventory to the vendor, and took advantage of discounts from the vendor of $380. At the end of the quarter the balance in inventory is $35,500. What is the cost of goods sold? a. $12,500 b. $23,600 c. $21,720 d. $23,100

c. $21,720

A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, the company purchased 10 units at $22 each. On November 5, the company sold 8 units for $55 each. On November 6, the company purchased 6 units at $25 each. The company uses a perpetual inventory system. Using the weighted average method, what is the value of the ending inventory on November 30? a. $304 b. $404 c. $299 d. $280

c. $299

Sanchez Company engaged in the following transactions during Year 1: 1) Started the business by issuing $13,700 of common stock for cash. 2) The company paid cash to purchase $8200 of inventory. 3) The company sold inventory that cost $5600 for $11,650 cash. 4) Operating expenses incurred and paid during the year, $5100. Sanchez Company engaged in the following transactions during Year 2: 1) The company paid cash to purchase $12,000 of inventory. 2) The company sold inventory that cost $9800 for $18,250 cash. 3) Operating expenses incurred and paid during the year, $6100. Note: Sanchez uses the perpetual inventory system. What is the amount of retained earnings that will be shown on the balance sheet at December 31, Year 2? a. $14,000 b. $8100 c. $3300 d. $2350 e. None of the above.

c. $3300

The following is a listing of some of the balance sheet accounts and all of the income statement accounts for Northview Company as they appear on the company's adjusted trial balance. Accounts Payable $ 30,000 Accounts Receivable 33,000 Inventory 60,000 Advertising Expense 36,000 Cost of Goods Sold 267,000 Delivery Expense 18,000 Income Tax Expense 6,000 Insurance Expense 3,000 Rent Expense 36,000 Sales Revenue 480,000 Sales Discounts 33,000 Sales Returns & Allowances 57,000 Net sales would be: a. $90,000. b. $372,000. c. $390,000. d. $480,000.

c. $390,000.

Prior to closing, Syracuse Company's accounting records showed the following balances: Retained earnings $6500 Service revenue 7850 Interest revenue 900 Salaries expense 4700 Operating expense 1450 Interest expense 600 Dividends 1200 After closing, what is the balance of the Retained Earnings account? a. $6500 b. $9700 c. $7300 d. $8500

c. $7300

The inventory records for Radford Co. reflected the following: Beginning inventory @ May 1 1400 units @ $4.40 First purchase @ May 7 1500 units @ $4.60 Second purchase @ May 17 1700 units @ $4.70 Third purchase @ May 23 1300 units @ $4.80 Sales @ May 314500 units @ $6.30 What is the amount of gross margin assuming the weighted-average inventory cost flow method? a. $6750 b. $21,600 c. $7515 d. $14,400 e. None of the above.

c. $7515

Moreland Moldings purchased goods on credit costing $85,000 with terms of 3/10, n/30. Payment is made to the seller 7 days after the purchase. How would the payment be recorded? a. Debit Inventory for $2,550, debit Cash for $82,450, and credit Accounts Payable for $85,000. b. Debit Accounts Payable for $85,000, credit Cash for $82,450, and credit Cost of Goods Sold for $2,550. c. Debit Accounts Payable for $85,000 credit Cash for $82,450, and credit Inventory for $2,550. d. Debit Accounts Payable and credit Cash for $85,000.

c. Debit Accounts Payable for $85,000 credit Cash for $82,450, and credit Inventory for $2,550

Moreland Moldings purchased goods on credit costing $85,000 with terms of 3/10, n/30. Payment is made to the seller 7 days after the purchase. How would the payment be recorded? a. Debit Inventory for $2,550, debit Cash for $82,450, and credit Accounts Payable for $85,000. b. Debit Accounts Payable for $85,000, credit Cash for $82,450, and credit Cost of Goods Sold for $2,550. c. Debit Accounts Payable for $85,000 credit Cash for $82,450, and credit Inventory for $2,550. d. Debit Accounts Payable and credit Cash for $85,000.

c. Debit Accounts Payable for $85,000 credit Cash for $82,450, and credit Inventory for $2,550.

On December 1, Year 1, Jack's Snow Removal Company received $10,200 of cash in advance from a customer and promised to provide services for that customer during the months of December, January, and February. How will the Year 1 year-end adjustment to recognize the partial expiration of the contract impact the elements of the financial statements model? a. Equity will increase by $3400 and Total assets will increase by $3400 b. Total liabilities will increase by $3400 c. Equity will increase by $3400 d. Total assets will increase by $3400

c. Equity will increase by $3400

Which of the following statements about the lower of cost or market rule/net realizable value is not correct? a. The lower of cost or market/net realizable value rule sometimes causes the value of inventory to be written down below cost, but will never cause the value of inventory to be increased above cost. b. The amount of inventory write-down is an expense which most companies report as cost of goods sold. c. Lower of cost or market is an inventory cost method used to determine cost of goods sold and ending inventory. d. The lower of cost or market/net realizable value (LCM/NRV) rule results in reporting inventory conservatively, at an amount that does not exceed its actual value.

c. Lower of cost or market is an inventory cost method used to determine cost of goods sold and ending inventory.

What is the effect on the financial statements when a company fails to adjust the unearned revenue account for revenues earned at year-end? a. Net income is understated and assets are understated. b. Revenues are understated and liabilities are understated. c. Net income is understated and liabilities are overstated. d. Revenues are understated and stockholders' equity is overstated.

c. Net income is understated and liabilities are overstated.

Sales revenue equals $367,810, sales returns and allowances are $10,000, and sales discounts total $14,180. The cost of goods sold is $216,490, operating expenses are $28,500, and the company incurs $31,640 of income tax expense. Which of the following statements is correct? a. Net sales equal $343,630 and gross profit is $98,640. b. Net sales equal $67,000 and gross profit is $98,640. c. Net sales equal $343,630 and gross profit is $127,140. d. Net sales equal $367,810 and gross profit is $67,000.

c. Net sales equal $343,630 and gross profit is $127,140.

Sales revenue equals $367,810, sales returns and allowances are $10,000, and sales discounts total $14,180. The cost of goods sold is $216,490, operating expenses are $28,500, and the company incurs $31,640 of income tax expense. Which of the following statements is correct? a. Net sales equal $343,630 and gross profit is $98,640. b. Net sales equal $67,000 and gross profit is $98,640. c. Net sales equal $343,630 and gross profit is $127,140. d. Net sales equal $367,810 and gross profit is $67,000.

c. Net sales equal $343,630 and gross profit is $127,140.

Which of the following is the usual last step in the accounting cycle? a. Preparing the adjusted trial balance. b. Preparing the financial statements. c. Preparing a post-closing trial balance. d. Preparing an unadjusted trial balance.

c. Preparing a post-closing trial balance.

The Prepaid Insurance account has a normal balance of $5,625 at the beginning of the month. The company used $1,470 of insurance coverage during the month. Which of the following statements is correct? a. The company should credit Insurance Expense for $1,470 and debit Prepaid Insurance for $1,470. b. Retained earnings will decrease and stockholders' equity will increase. c. The company should debit Insurance Expense for $1,470 and credit Prepaid Insurance for $1,470. d. Retained earnings and stockholders' equity will both increase.

c. The company should debit Insurance Expense for $1,470 and credit Prepaid Insurance for $1,470.

Which of the following statements about the presentation of a trial balance is correct? a. The adjusted trial balance shows the end-of-year balance for Retained Earnings. b. An adjusted trial balance presents account balances in the same level of detail as in the presentation of the financial statements. c. The order of accounts on a trial balance is as follows: assets, liabilities, stockholders' equity, dividends, revenues, and expenses. d. The adjusted trial balance shows all the debit and credit postings to all the ledger accounts

c. The order of accounts on a trial balance is as follows: assets, liabilities, stockholders' equity, dividends, revenues, and expenses.

Which of the following statements about the adjusted and post-closing trial balances is correct? a. The adjusted trial balance is prepared after the financial statements to verify that the numbers are accurate. b. The primary purpose of the post-closing trial balance is to see whether revenues are greater than expenses. c. The post-closing trial balance is a check that the accounting records are still in balance after posting all closing entries to the accounts. d. The adjusted trial balance debit column total is the amount to be shown as Total Assets on the Balance Sheet.

c. The post-closing trial balance is a check that the accounting records are still in balance after posting all closing entries to the accounts.

If certain assets are partially used up during the accounting period, then: a. nothing is recorded on the financial statements until they are completely used up. b. a liability account is decreased and an expense is recorded. c. an asset account is decreased and an expense is recorded. d. nothing is recorded on the financial statements until they are replaced or replenished.

c. an asset account is decreased and an expense is recorded

A company uses up $5,000 of an existing asset and the company adjusts its accounts accordingly. This is an example of a(n): a. accrual adjustment. b. closing adjustment. c. deferral adjustment. d. unethical adjustment.

c. deferral adjustment.

After the adjustments have been completed, the adjusted balance in the Interest Payable account represents: a. total interest that has been paid or accrued during the period. b. interest on notes receivable owed to the company. c. interest that has accrued, but has not been paid, at the end of the period. d. interest that has been prepaid on existing debt at the end of the period.

c. interest that has accrued, but has not been paid, at the end of the period.

A company makes a deferral adjustment that increased a revenue account. This must mean that a(n): a. expense account was decreased by the same amount. b. expense account was increased by the same amount. c. liability account was decreased by the same amount. d. asset account was decreased by the same amount.

c. liability account was decreased by the same amount.

AAA Company uses a periodic inventory system and has the following information regarding its inventory: Beginning inventory 500 units @ 17 $ 8,500 Purchase on January 25 600 units @ 18 10,800 Purchase on March 15 500 units @ 19 9,500 Purchase on October 2 700 units @ 20 14,000 Goods available for sale $ 42,800 There are 900 units in ending inventory. What is the amount of the ending inventory using the FIFO method? a. $8,500 b. $19,300 c. $14,000 d. $17,800

d. $17,800

Parker, Incorpoated had a beginning balance in its Retained Earnings account of $385,700. During the year, the company declared and paid a $4,720 dividend and, at the end of the year, it reported Retained Earnings of $400,060. The company's net income for the year was: a. $14,360 b. $0 c. $9,640 d. $19,080.

d. $19,080.

Chase Co. uses the perpetual inventory method. The inventory records for Chase reflected the following information: Jan 1 Beginning inventory 900 units @ $3.50 Jan 12 Purchase 1000 units @ $3.30 Jan 18 Sales 1100 units @ $5.00 Jan 21 Purchase 900 units @ $3.60 Jan 25 Purchase 700 units @ $3.40 Jan 31 Sales 1050 units @ $5.00 Assuming Chase uses a LIFO cost flow method, what is the amount of cost of goods sold for the sales transaction on January 18? a. $3630 b. $3850 c. $3810 d. $3650 e. None of the above.

d. $3650

During the current year, Gomez Co. had beginning inventory of $2,000 and ending inventory of $1,600. The cost of goods sold was $4,400. What is the amount of inventory purchased during the year? a. $6,000 b. $4,400 c. $8,000 d. $4,000 e. None of the above

d. $4,000

Delta Diamonds uses a periodic inventory system. The company had five one-carat diamonds available for sale this year: one was purchased on June 1 for $950, two were purchased on July 9 for $1000 each, and two were purchased on September 23 for $1050 each. On December 24, it sold one of the diamonds that was purchased on July 9. Using the specific identification method, its ending inventory (after the December 24 sale) equals: a. None of the above b. $2950. c. $1000. d. $4050. e. $4100.

d. $4050.

A company had calculated net income to be $78,350 based on the unadjusted trial balance. The following adjusting entries were then made for: 1. Salaries and wages owed but not yet recorded or paid of $870 2. Interest earned but not recorded or received from investments of $830 3. Prepaid insurance premiums amounting to $630 have expired 4. Unearned revenue in the amount of $830 has now been earned. Required:Determine the amount of net income (loss) that will be reported after the adjustments are recorded. a. $75,190 b. $78,110 c. $80,640 d. $78,510

d. $78,510

Darlington Company entered into the following business events during its first month of operations. The company uses the perpetual inventory system. 1) The company purchased $12,300 of merchandise on account under terms 4/10, n/30. 2) The company returned $1,800 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $18,600 cash. What is the gross margin that results from these four transactions? a. $6,048 b. $8,592 c. $6,300 d. $8,520 e. None of the above

d. $8,520

Sparks Furniture Company carries three lines of sofas. Information about the sofa inventory as of the end of its most recent fiscal year follows. If LCM is applied to each separate product line, what is the amount of the adjustment that must be made to the company's inventory? Product Line Cost per Unit Market Value per Unit Quantity Rustic $740 $805 270 Mediterranean 640 685 380 Contemporary 990 730 315 a. $29,700 b. $34,650 c. $47,250 d. $81,900 e. None of the above

d. $81,900

Glasgow Enterprises started the period with 65 units in beginning inventory that cost $2.60 each. During the period, the company purchased inventory items as follows: Purchase No. of Items Cost 1 300 $3.10 2 200 $3.20 3 55 $3.60 Glasgow sold 325 units after purchase 3 for $9.90 each.What is Glasgow's cost of goods sold under FIFO? a. $1170 b. $1062 c. $845 d. $975 e. None of the above.

d. $975

Coranado Company purchases $70,000 of inventory from a wholesaler who allows 45 days to pay. In addition, the wholesaler offers a 3% discount if payment is made within 12 days. These payment terms would be expressed as: a. 0.03/12, n/45. b. n/45, 3/12. c. n/45, 0.03/12. d. 3/12, n/45.

d. 3/12, n/45.

Coranado Company purchases $70,000 of inventory from a wholesaler who allows 45 days to pay. In addition, the wholesaler offers a 3% discount if payment is made within 12 days. These payment terms would be expressed as: a. 0.03/12, n/45. b. n/45, 3/12. c. n/45, 0.03/12. d. 3/12, n/45.

d. 3/12, n/45.

Consider the following T-account in the ledger of Gibbs Company. The company uses the perpetual inventory system. Merchandise Inventory 5,000 400 What business event would result in the $400 credit? a. A purchase allowance granted to Gibbs. b. The cost of goods sold by Gibbs. c. A purchase return by Gibbs. d. All of these answer choices are correct. e. None of these answer choices are correct.

d. All of these answer choices are correct.

Which of the following will happen if the accrual adjusting entry is not made for revenue earned but not yet recorded? a. Assets will be understated and revenues will be overstated. b. Revenues will be understated and assets will be overstated. c. Both revenues and assets will be overstated. d. Both revenues and assets will be understated.

d. Both revenues and assets will be understated.

Which of the following is a term for the value at which an asset is reported on a financial statement? a. Accrual value b. Adjusted value c. Equipment, as adjusted d. Carrying value

d. Carrying value

Maxell Company uses the FIFO method to assign costs to inventory and cost of goods sold. The company uses a periodic inventory system. Consider the following information: Date Description # of units Cost per unit January 1 Beginning inventory 210 $5 June 2 Purchase 75 $4 November 5 Sales 245 What amounts would be reported as the cost of goods sold and ending inventory balances for the year? a. Cost of goods sold $1,225; Ending inventory $215 b. Cost of goods sold $1,365; Ending inventory $180 c. Cost of goods sold $1,150; Ending inventory $200 d. Cost of goods sold $1,190; Ending inventory $160

d. Cost of goods sold $1,190; Ending inventory $160

If merchandise costing $500 that was sold for cash at a price of $620 is returned by the customer, how would this transaction be recorded when using a perpetual inventory system? a. Debit Cash and credit Sales Returns and Allowances for $620. b. Debit Inventory and credit Cost of Goods Sold for $620. c. Debit Sales Returns and Allowances and credit Cash for $620; debit Cost of Goods Sold and credit Inventory for $500. d. Debit Sales Returns and Allowances and credit Cash for $620; debit Inventory and credit Cost of Goods Sold for $500.

d. Debit Sales Returns and Allowances and credit Cash for $620; debit Inventory and credit Cost of Goods Sold for $500.

Which of the following would cause the greatest increase in a company's inventory turnover ratio? a. Keeping the same amount of inventory on hand while unit sales are increasing. b. Increasing the amount of inventory on hand while unit sales are increasing. c. Keeping the same amount of inventory on hand while unit sales are decreasing d. Decreasing the amount of inventory on hand while unit sales are increasing.

d. Decreasing the amount of inventory on hand while unit sales are increasing.

Abbott Company purchased $7,200 of merchandise inventory on account. Abbott uses the perpetual inventory system. Which of the following entries would be required to record this transaction? a. Cost of Goods Sold 7,200​ Accounts Payable 7,200​ b. Accounts Payable 7,200​ Purchases 7,200​ c. Accounts Payable 7,200​ Inventory 7,200​ d. Inventory 7,200​ Accounts Payable 7,200​ e. none of the above

d. Inventory 7,200​ Accounts Payable 7,200​

Which inventory costing method will produce an amount for cost of goods sold that is closest to current market value? a. Specific identification b. FIFO c. Weighted average d. LIFO e. None of the above.

d. LIFO

Which of the following is not one of the primary goals of inventory management? a. Maintain a sufficient quantity of inventory to meet customer needs. b. Ensure inventory quality meets customers' expectations and company standards. c. Minimize the cost of acquiring and carrying inventory (including costs related to purchasing, production, storage, spoilage, theft, obsolescence, and financing) d. Minimize the quantity of ending inventory.

d. Minimize the quantity of ending inventory.

Which of the following is not one of the primary goals of inventory management? a. Maintain a sufficient quantity of inventory to meet customer needs. b. Ensure inventory quality meets customers' expectations and company standards. c. Minimize the cost of acquiring and carrying inventory (including costs related to purchasing, production, storage, spoilage, theft, obsolescence, and financing). d. Minimize the quantity of ending inventory.

d. Minimize the quantity of ending inventory.

Which of the following errors causes net income to be understated? a. Employee wages that have not been paid are not recorded. b. Depreciation Expense is not recorded. c. Collection of an Accounts Receivable is not recorded. d. Revenue that has been earned but not yet collected has not been recorded.

d. Revenue that has been earned but not yet collected has not been recorded.

Which of the following correctly describes the following adjusting journal entry? Accounts receivable xxx Restaurant sales revenue xxx a. Total assets do not change. b. Net income is not affected. c. Stockholders' equity decreases. d. The transaction is an example of an accrual.

d. The transaction is an example of an accrual.

Assume that a perpetual inventory system is in use. Which of the following statements regarding the journal entries prepared is correct? a. "Freight-out" or delivery costs associated with sales should be included in Cost of Goods Sold. b. When a company receives payment from a customer for a sale, Cash is debited and Accounts Payable is credited. c. When a company grants an allowance to a customer, Inventory is credited when using a perpetual inventory system. d. When a customer returns inventory, the seller debits Sales Returns & Allowances under a perpetual inventory system.

d. When a customer returns inventory, the seller debits Sales Returns & Allowances under a perpetual inventory system.

If a company achieves a small increase in its gross profit percentage from one year to the next, the company: a. will have a higher net income. b. must have had a sales volume increase. c. must have decreased its operating expenses. d. might be obtaining products at a lower cost per unit.

d. might be obtaining products at a lower cost per unit.