Fanatical accounting final
Blain Company has $10,000 of accounts receivable that are current, $5,000 that are between 0 and 30 days past due, $3,000 that are between 30 and 60 days past due, and $800 that are more than 60 days past due. Blain estimates that 2% of the receivables that are current will be uncollectible, 5% of those between 0 and 30 days past due will be uncollectible, 10% of those between 30 and 60 days past due will be uncollectible, and 50% of those more than 60 days past due will be uncollectible. Just prior to recognizing uncollectible accounts expense, Blain's allowance for doubtful accounts account has a $100 positive balance. Assuming Blain uses the aging method to estimate uncollectible accounts expense, the amount of uncollectible expense will be
$1,050. because Uncollectible accounts expense = Required ending balance − Current balance = $1,150 − $100 = $1,050.
At the end of Year 1, Blain Company has $10,000 of accounts receivable that are current, $5,000 that are between 0 and 30 days past due, $3,000 that are between 30 and 60 days past due, and $800 that are more than 60 days past due. Blain estimates that 2% of the receivables that are current will be uncollectible, 5% of those between 0 and 30 days past due will be uncollectible, 10% of those between 30 and 60 days past due will be uncollectible, and 50% of those more than 60 days past due will be uncollectible. At the beginning of Year 1, Blain had a $1,000 positive balance in its allowance for doubtful accounts account. During Year 1 Blain wrote-off $1,100 of uncollectible receivables. Assuming Blain uses the aging method to estimate uncollectible accounts expense, the amount of uncollectible expense will be
$1,250.
ABC Company ended Year 1 with the following account balances: Cash $590, Common Stock $420, and Retained Earnings $210. The following transactions occurred during Year 2: 1. Issued common stock for $17,700 cash. 2. ABC borrowed an additional $10,200 from Chris Bank. 3. ABC earned $8,700 of revenue on account. 4. ABC incurred $4,300 of operating expenses on account. 5. Cash collections of accounts receivables were $6,200. 6. ABC provided additional services to customers for $1,100 cash. 7. ABC purchased land for $14,800. 8. ABC used $3,400 in cash to make a partial payment on its accounts payable. 9. ABC declared and paid a $240 dividend to the stockholders. 10. On December 31 ABC had accrued salaries of $4,200. What is the amount of net income (loss) reported on the December 31, Year 2 income statement?
$1,300 Revenue is recognized when it is earned and expenses when they are incurred, regardless of when cash changes hands. The issuance of common stock, borrowing, cash collections of accounts receivable, purchase of land, cash payment to partially settle accounts payable, and the payment of dividends do not affect net income. Revenue = $8,700 earned revenue on account + $1,100 provided services for cash = $9,800 Expenses = $4,300 operating expenses + $4,200 accrued salaries = $8,500 Net income = Revenue of $9,800 − Expenses of $8,500 = $1,300
On January 1, Year 1, Jing Company purchased office equipment that cost $37,500 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $2,700. The equipment had a five-year useful life and a $12,700 expected salvage value. Assuming the company uses the double-declining-balance depreciation method, what are the amounts of depreciation expense and book value, respectively, that would be reported in the financial statements prepared as of December 31, Year 3?
$1,772 and $12,700
On January 1, Year 1, Milton Manufacturing Company purchased equipment with a list price of $88,000. A total of $4,000 was paid for installation and testing. During the first year, Milton paid $6,000 for insurance on the equipment and another $2,200 for routine maintenance and repairs. Milton uses the units-of-production method of depreciation. Useful life is estimated at 100,000 units, and estimated salvage value is $8,000. During Year 1, the equipment produced 13,000 units. What is the amount of depreciation for Year 1?
$10,920 Cost of machine = List price of $88,000 + Installation costs of $4,000 = $92,000 Depreciation expense = [(Cost of $92,000 − Salvage value of $8,000) ÷ Estimate of 100,000 units] × Units produced during Year 1 of 13,000 = $10,920
On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a truck. The truck was expected to have a four-year useful life and an $8,000 salvage value. If Marino uses the straight-line method, the amount of accumulated depreciation shown on the Year 2 balance sheet is
$20,000 Depreciation expense per year = (Cost of the asset − Salvage value) ÷ Useful life Depreciation expense per year = ($48,000 Cost − $8,000 Salvage) ÷ 4 Year life = $10,000
Carson Company has an inventory turnover of 12.75, and its inventory amounts to $2,400,000. What is the amount of cost of goods sold?
$30,600,000 Inventory turnover = Cost of goods sold ÷ Inventory12.75 = Cost of goods sold ÷ $2,400,000Cost of goods sold = 12.75 × $2,400,000 = $30,600,000
The April 30 bank statement for Trimble Corporation shows an ending balance of $38,944. The unadjusted cash account balance was $32,550. The accountant for Trimble gathered the following information: There was a deposit in transit for $5,108. The bank statement reports a service charge of $144. A credit memo included in the bank statement shows interest earned of $655. Outstanding checks totaled $13,161. The bank statement included a $2,170 NSF check deposited in April. What is the true cash balance as of April 30?
$30,891 True cash balance = Unadjusted bank balance of $38,944 + Deposits in transit of $5,108 − Outstanding checks of $13,161 = $30,891.
Greer Company pays Jamal Perry a salary of $3,000 per week. How much cash will Greer submit to the federal government for FICA tax for this employee (including both the employee and employer portions)? (Assume a Social Security rate of 6 percent on the first $110,000 of income and a Medicare rate of 1.5 percent on all earnings.)
$450 Employee's portion of FICA = $3,000 × 7.5% = $225, which is withheld from Jamal's gross pay. The company matches that amount and, as such, is responsible for a total of $450 (or $225 + $225).
Keisha Dress Shops experienced the following events during its third accounting period. (1) Sold merchandise that cost $92,000 for $140,000 cash. (2) Paid $30,000 of operating expenses. (3) Paid a $4,000 cash dividend. Based on this information, the amount of the gross margin is
$48,000. Gross margin is determined by subtracting cost of goods sold from the sales revenue. In this case, the gross margin is $48,000 ($140,000 sales revenue - $92,000 cost of goods sold). Operating expenses are subtracted from the gross margin to determine the net income. Dividends are not shown on the income statement.
The inventory records for Radford Company reflected the following: Beginning inventory @ May 1100 units @ $4.00 First purchase @ May 7300 units @ $4.40 Second purchase @ May 17500 units @ $4.60 Third purchase @ May 23100 units @ $4.80 Sales @ May 31900 units @ $7.80 What is the amount of ending inventory assuming the FIFO cost flow method?
$480 The first-in, first-out (FIFO) cost flow method requires that the cost of the items purchased first be assigned to cost of goods sold. Ending inventory units = 1,000 units available for sale − 900 units sold = 100 units in ending inventory Ending inventory = 100 units × $4.80 per unit = $480
On September 30 the bank statement of Fine Company showed a balance of $7,800. The following information was revealed by comparing the bank statement to the cash balance in Fine's accounting records: Deposits in transit amounted to $3,150 Outstanding checks amounted to $6,200 A $550 check was incorrectly drawn on Fine's account NSF checks returned by the bank were $750 The bank service charge was $29 Credit memo for $75 for the collection of one of the company's accounts receivable What is the true cash balance?
$5,300 True cash balance = Unadjusted bank balance of $7,800 + Deposits in transit of $3,150 − Outstanding checks of $6,200 + Error correction of $550 = $5,300
Rainey Company's true cash balance at October 31 is $5,710. The following information is available for the bank reconciliation: Outstanding checks, $600 Deposits in transit, $450 Bank service charges, $90 The bank had collected an account receivable for Rainey Company, $1,000 The bank statement included an NSF check written by one of Rainey's customers for $600. What was the unadjusted book balance at October 31?
$5,400 True cash balance of $5,710 = Unadjusted book balance (the unknown) − Service charge of $90 + Collection of the accounts receivable of $1,000 − NSF check of $600 Unadjusted book balance = $5,710 + $90 − $1,000 + $600 = $5,400
Tyler Company purchased equipment that cost $260,000 cash on January 1, Year 1. The equipment had an expected useful life of five years and an estimated salvage value of $10,000. Tyler depreciates its assets under the straight-line method. What is the amount of depreciation expense appearing on the Year 1 income statement?
$50,000
The following is a random list of the adjusted account balances of Wyoming Company as of the end of the current accounting period: see photo What is the total of the credit account balances that will be shown on the adjusted trial balance?
$63,100 Credit balances = Accounts payable of $5,200 + Service revenue of $18,700 + Retained earnings of $17,700 + Common stock of $21,500 = $63,100 To check: Debit balances = Cash of $18,500 + Land of $25,500 + Accounts receivable of $6,200 + Operating expenses of $12,900 = $63,100
At the end of Year 1, Voss Company had $6,000 of inventory. During Year 2 the following events occurred: (1) Voss Company purchased $30,000 of inventory with cash. (2) Sold $20,000 of inventory for $28,000 cash to customers. (3) At the end of the year, during a physical count of the inventory, it found only $15,000 of inventory on hand. What would Voss Company report for net income on the Year 2 Income Statement?
$7,000 Net income for year 2 is $7,000 (Sales 28,000 − 21,000 Cost of Goods Sold). Cost of goods sold is calculated as the cost of the inventory that is sold which is $20,000 (given in Event 2) plus the $1,000 of inventory shrinkage. Inventory shrinkage is calculated as the difference in the cost of inventory at the end of the year which is $16,000 (Beginning balance $6,000 + Purchased $30,000 − Inventory Sold $20,000) and the $15,000 that was physically counted at the end of the year.
Hardwick Company purchased a truck that cost $53,000. The company expected to drive the truck 200,000 miles over its 5-year useful life, and the truck had an estimated salvage value of $3,000. Hardwick Company uses the units-of-production method of depreciation. If the truck is driven 30,000 miles in the current accounting period, what would be the amount of depreciation expense for the year?
$7,500 Depreciation expense = [(Cost of $53,000 − Salvage value of $3,000) ÷ Estimate of 200,000 units] × Miles driven during year of 30,000 = $7,500
On September 1, Year 1, Gomez Company collected $22,500 in advance from a customer for services to be provided over a one-year period beginning on that date. How much revenue would Gomez Company report related to this contract on its income statement for the year ended December 31, Year 1? How much would the company report as net cash flows from operating activities for Year 1?
$7,500; $22,500 Monthly revenue = Receipt of $22,500 ÷ 12 months = $1,875 per month Revenue (on the income statement) = $1,875 per month × 4 months (September through December) = $7,500 The company will recognize the $22,500 received as a cash inflow from operating activities in Year 1.
The following account balances were drawn from the Year 1 financial statements of Grayson Company: see photo What is the balance of the Common Stock account?
$9,200 Assets = Liabilities + Stockholders' Equity$5,900 + $3,000 + $9,500 = $2,000 + Stockholders' Equity Stockholders' Equity = $16,400 Stockholders' Equity = Common Stock + Retained Earnings $16,400 = Common Stock + ($4,200 + $11,000 − $8,000)$16,400 = Common Stock + $7,200 Common Stock = $9,200
Anton Company uses the perpetual inventory system and FIFO cost flow method. During the year, Anton purchased 400 units of inventory that cost $12.00 each and then purchased an additional 600 units of inventory that cost $16.00 each. If Anton sells 700 units of inventory, what is the amount of cost of goods sold?
$9,600 The first-in, first-out (FIFO) cost flow method requires that the cost of the items purchased first be assigned to cost of goods sold. Cost of goods sold = (400 × $12.00) + (300 × $16.00) = $9,600
The following information was drawn from the annual reports of two companies: see photo Based on this information, what is Company B's return on sales
27.27%. $600 operating income ÷ $2,200 sales revenue = 27.27%
A review of the bank statement and accounting records of Blake Company revealed the following items: 1)Three outstanding checks 2)A debit memo showing a bank service charge 3)A deposit in transit 4)An NSF check written by one of Blake's customers 5)A certified check written by Blake that remains outstanding 6)A credit memo reflecting interest revenue earned by Blake Which of the item(s) would be added to the unadjusted bank balance to determine the true cash balance?
3)A deposit in transit
How is the average number of days to collect accounts receivable computed?
365 ÷ Accounts receivable turnover ratio
The following information was drawn from the accounting records of Kassouf Sales Company (KSC). see photo The inventory account showed a $5,000 beginning balance and a $20,000 ending balance. Based on this information, the inventory turnover ratio is (if necessary, round calculations to two decimal points)
8.00 times Inventory turnover = Cost of goods sold ÷ Average inventory Inventory turnover = $100,000 ÷ [($5,000 + $20,000) ÷2] = 8 times
What would the journal entre look like to recognize the cash purchase of $500 of merchandise inventory?
A debit to inventory of $500 and a credit to cash for $500
Which of the following would most likely not be expensed using the straight-line method?
A mineral reserve
A company's chart of accounts includes, in part, the following account numbers and corresponding account titles: (1)Cash (2)Merchandise inventory (3)Cost of goods sold (4)Transportation-out (5)Dividends (6)Common stock (7)Selling expense (8)Loss on the sale of land (9)Sales Which accounts would affect operating income?
Accounts (3)Cost of goods sold, (4)Transportation-out, (7)Selling expense, and (9)Sales
Which of the following is a source of assets? A. Creditors B. Investors C. Operations
All the answers represent sources of assets.
On January 1, Year 1, Vanguard Company purchased a copyright for $12,000. Vanguard estimated the remaining useful life of the copyright to be 6 years. Which of the following correctly shows the effect of the first year's amortization of Vanguard's copyright?
Amortization decreases assets (copyright) and stockholders' equity (retained earnings). It increases expenses, which decreases net income. It does not affect cash flows.
Recognizing an expense may be accompanied by which of the following?
An increase in liabilities
Algonquin Company reported assets of $50,000, liabilities of $22,000 and common stock of $15,000. Based on this information only, what is the amount of the company's retained earnings?
Assets = Liabilities + Stockholders' equity; Stockholders' equity includes common stock and retained earnings. $50,000 = $22,000 + $15,000 + Retained earnings; Retained earnings = $13,000
On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method. On February 15, Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. Which of the following correctly states the effect of the adjusting entry, dated December 31, Year 1, on the elements of the financial statements of the Loudoun Corporation?
B because Uncollectible accounts expense = Credit sales of $112,500 × 3% = $3,375
Chow Company earned $2,700 of cash revenue, paid $1,600 for cash expenses, and paid a $500 cash dividend to its owners. Which of the following statements is true?
Cash revenue and cash expenses are operating activities. Paying dividends is a financing activity. $2,700 revenue − $1,600 expense = $1,100 cash inflow from operating activities.
At the end of the current accounting period, Ringgold Company recorded depreciation of $15,000 on its equipment. What is the effect of this entry on the company's balance sheet?
Decrease stockholders' equity and decrease assets
Finn Company reported assets of $1,480 and stockholders' equity of $500. What amount will Finn report for liabilities?
In the accounting equation, assets equal claims (liabilities + stockholders' equity). If assets are $1,480, total claims must also be $1,480. Therefore, liabilities must be $1,480 − $500, or $980.
The balance in Accounts Receivable at the beginning of the year amounted to $3,680. During the year, $11,400 of credit sales were made to customers. If the ending balance in Accounts Receivable amounted to $2,420, and uncollectible accounts expense amounted to $1,040, what is the amount of cash inflow from customers that would appear in the operating activities section of the cash flow statement?
None of these answers are correct.
What happens when a company collects cash from accounts receivable?
One asset increases and another asset decreases by an equal amount.
Paying cash to settle a salaries payable obligation will affect which section of the statement of cash flows?
Operating activities
The following general journal entry is taken from the journal of Becker's Bookstore: depit to Transportation-out for $198 credit to cash for $198 Which of the following choices reflects how the entry will affect the company's financial statements? see photo
Option A Transportation-out is a period cost that decreases assets (cash) and increases expenses (transportation-out), which decreases net income and stockholders' equity (retained earnings). It is reported as a cash outflow from operating activities.
During Year 1, China Enterprises experienced the following events. (1) Earned $10,000 of revenue on account (2) Incurred $9,000 of expenses on account Based on this information, which of the following describes the combined effects of both events on the amount of total assets, net income and cash flow from operating activities shown on the Year 1 financial statements?
Option B
The owner of Barnes Company established a petty cash fund amounting to $400. What is the effect on the financial statements of the entry to record this transaction? see photo
Option C
A company purchased inventory on account. If the perpetual inventory system is used, which of the following choices accurately reflects how the purchase affects the company's financial statements? see photo
Option C Purchasing merchandise inventory on account increases assets (merchandise inventory) and increases liabilities (accounts payable). Because product costs are expensed when inventory is sold, not when the goods are purchased, the event does not affect net income. Since the inventory was purchased on account, it does not affect the statement of cash flows.
Which of the following transactions would be reported on the statement of changes in stockholders' equity?
Paid a $100 cash dividend to the owners.
Which of the following cash transactions would not affect total assets?
Purchasing land for cash
Baltimore Company accepts a credit card as payment for $950 of services provided to a customer. The credit card company charges a 4% handling charge for its collection services. Select the answer that shows how the entry to record the event would affect Baltimore's financial statements
Sales revenue = $950Credit card expense = $38 ($950 sales revenue × 0.04 credit card fee) The account receivable from the credit card company = $912 ($950 revenue − $38 expense) Baltimore recognizes $950 revenue and $38 credit card expense resulting in net income of $912 which increases equity (retained earnings). Since the sale was on account, assets (accounts receivable from the credit card company) increases. Since the company has not collected cash from the credit card company, the statement of cash flows is not affected.
On January 1, Year 2, the Supplies account of Sheldon Company had a balance of $2,300. During the year, the company purchased $6,800 of supplies on account and made partial payments totaling $3,200 on those accounts. On December 31, Year 2, Sheldon determined that there were $4,100 of supplies on hand. Which of the following would be reported on Sheldon's Year 2 financial statements?
Supplies = Amount on hand at end of year of $4,100 Supplies expense = Beginning balance of Supplies account of $2,300 + Supplies purchased of $6,800 − Ending balance of Supplies account of $4,100 = $5,000
Middleton Company uses the perpetual inventory system. The company purchased an item of inventory for $130 and sold the item to a customer for $200. How will the sale affect the company's Inventory account?
The Inventory account will decrease by $130.
Which of the following is a (are) permanent account(s)?
The Retained Earnings account
Which of the following statements is true regarding a trial balance that balances?
The equality of debits and credits has been proven.
Why are the inventory and cost of goods sold accounts attractive targets for managerial fraud?
These accounts are more significant than most other accounts.
Which of the following happens as a result of selling $130 of merchandise to a customer for $200 cash in a state where the sales tax rate is 4%?
Total assets increase by $78, Stockholder's equity increases by $70, and The cash flow from operating activities increases by $208
Li Company paid cash to purchase land. What happened as a result of this business event?
Total assets were unaffected.
Which of the following would be classified as a long-term operational asset?
Trademark
When do the effects of warranty obligations affect the statement of cash flows?
When there is a settlement of a warranty claim made by a customer
Which of the following statements best describes the balance in a revenue account at the beginning of an accounting period?
Zero because the temporary accounts (that is, revenue, expense, and dividends) are closed prior to the start of the next accounting cycle.
A transaction has been recorded in the T-accounts of Simpson Company as follows: see photo Which of the following could be an explanation for this transaction? a. The company borrowed $850. b. The company repaid a $850 debt. c. Simpson acquired $850 cash from the issue of common stock. d. The company loaned $850 to another company.
a. The company borrowed $850.
Which of the following statements about debits is false? a. Debits Decrease Liabilities. b. Debits Increase Liabilities. c. Debits Increase Assets. d. Debits Increase Expenses.
b. Debits Increase Liabilities.
Which of the following statements concerning internal controls is true? a. Internal accounting controls are limited to the policies and procedures used to protect the company from embezzlement. b. Strong internal controls provide reasonable assurance that the objectives of a company will be accomplished. c. Internal administrative controls are designed to limit the amount of funds spent on investments. d. The control procedure, segregation of duties, prohibits the employment of a husband and wife or other closely related parties within the same company.
b. Strong internal controls provide reasonable assurance that the objectives of a company will be accomplished.
A transaction has been recorded in the T-accounts of Gibbs Company as follows: see photo Which of the following could be an explanation for this transaction? a. Gibbs has completed services for which they had earlier received cash in advance. b. Gibbs has provided services to a customer on account. c. Gibbs has received cash for service to be provided in the future. d. Cash has been paid out to a company that will provide future services to Gibbs Company.
c. Gibbs has received cash for service to be provided in the future.
Hoover Company purchased two identical inventory items. The item purchased first cost $41.00. The item purchased second cost $45.50. Then Hoover sold one of the inventory items for $60. Based on this information, which of the following statements is true? a. The ending inventory is $45.50 if Hoover uses the LIFO cost flow method. b. The cost of goods sold is $45.50 if Hoover uses the FIFO cost flow method. c. The gross margin is $16.75 if Hoover uses the weighted-average cost flow method. d. The cost of goods sold is $41.00 if Hoover uses the LIFO cost flow method.
c. The gross margin is $16.75 if Hoover uses the weighted-average cost flow method. Using weighted average, cost of goods sold is calculated by multiplying the average cost per unit by the number of units sold. If Hoover uses weighted-average, the average cost per unit is $43.25. Therefore, gross margin will be $16.75 (or Sales of $60 − Cost of goods sold of $43.25).
Which of the following internal control procedures should be implemented to control cash? a. Providing copies of written receipts to customers b. Depositing cash receipts in the bank on a timely basis c. Disbursements by prenumbered checks d. All of these answer choices are correct
d. All of these answer choices are correct
Which of the following account titles is normally used in a periodic inventory system? a. Purchases. b. Purchase Returns and Allowances. c. Transportation-in. d. All of these answer choices are normally used.
d. All of these answer choices are normally used.
Which of the following statements is true with regards to financial statement audits? a. Financial audits are directed toward the discovery of fraud. b. Auditors will not disclose information that they have acquired as a result of their accountant-client relationship. c. The auditors guarantee that the financial statements are accurate and correct. d. Auditors provide reasonable assurance that statements are free from material misstatements, whether caused by errors or fraud.
d. Auditors provide reasonable assurance that statements are free from material misstatements, whether caused by errors or fraud.
The bank statement for Franklin Company showed a $6,000 credit. Which of the following could have caused this credit? a. Franklin Company paid bills with cash b. Franklin Company wrote a check c. Franklin Company collected cash that was not deposited d. Franklin Company made a deposit
d. Franklin Company made a deposit
What effect will an overstatement of ending inventory at the end of Year 1 have on the amounts reported on the Year 1 financial statements? a. Understatement of retained earnings b. Overstatement of cost of goods sold c. Understatement of net income d. Overstatement of total assets
d. Overstatement of total assets
A company's chart of accounts includes, in part, the following account numbers and corresponding account titles: see photo When using a perpetual inventory system, which of the following events is an asset use transaction? a. Purchased inventory on account b. Paid cash to purchase inventory c. Paid cash for transportation-in costs d. Paid cash for transportation-out costs
d. Paid cash for transportation-out costs
Which of the following is not required to apply the gross margin method? a. Amount of purchases during the current period b. Total sales for the current period c. The beginning inventory for the current period d. The amount of inventory on hand at the end of the current period
d. The amount of inventory on hand at the end of the current period
Westover Company accepts a credit card as payment for $1,000 of services provided to a customer. The credit card company charges a 4% handling charge for its collection services. Select the journal entry that shows how collecting the account receivable from the credit card company would be recorded.
debit 960 to cash credit 960 to Accounts Receivable - Credit Card Company
On January 1, Year 2 Boothe Company paid $12,000 cash to extend the useful life of a machine. Which of the following general journal entries would be required to recognize this expenditure?
debit Accumulated depreciation for 12000 credit cash for 12000
Explorer Supplies, Incorporated had sales of $120,000 in Year 1. Explorer warrants its products and estimates warranty expense to be 3% of sales. Which of the following journal entries would be required to recognize the year-end warranty obligation?
debit Warranty Expense for 3600 credit Warranty Payable for 3600
Stable Enterprises had sales of $230,000 in Year 1. Stable warrants its products and estimates warranty expense to be 4% of sales. In Year 2 Stable paid $9,000 cash to settle warranty obligations. Which of the following journal entries would be required to recognize the settlement of the warranty obligations?
debit Warranty Payable for 9000 credit cash for 9000
Kincaid Company provided consulting services of $3,800 to a customer who paid $1,800 and promised to pay the remainder next month. Which of the following journal entries correctly records this transaction?
debit cash $1800 debit accounts receivable $2000 credit consulting revenue $3800
Which of the following general journal entries would be used to recognize $7,500 of uncollectible accounts expense under the direct write-off method?
debit to Accounts receivable credit Uncollectible accounts expenses
On January 1, Year 1, Marino Moving Company paid $48,000 cash to purchase a truck. The truck was expected to have a four-year useful life and an $8,000 salvage value. Marino uses the straight-line method. On January 1, Year 3, Marino's accounting records contained the balances shown in the following financial statements model. Also, on January 1, Year 3, the company paid $10,000 to replace the engine to make the truck better by enabling it to operate using less expensive natural gas. Which of the following shows the journal entry that would be necessary to replace the engine on January 1, Year 3?
debit truck for 10000 credit cash for 10000
The following table shows the amount of revenue generated by three different companies over a three-year period of time. Brown Company year 1: 30,000 year 2: 20,000 year 3: 10,000 Based on this information alone, Brown Company should depreciate its long-term assets using
double-declining-balance depreciation.
Which term describes assets earned from operations that have been reinvested into the business?
retained earnings
Jefferson Company borrowed $6,000 on April 1, Year 1. The one-year note carried a 6% rate of interest. The amount of cash outflow from operating activities that Jefferson would report in Year 1 and Year 2, respectively would be
$0, and $360. Total annual interest = $6,000 × 0.06 = $360 Since the total amount of interest is paid on the maturity date in Year 2, there would be zero cash outflow in Year 1 and $360 in Year 2.
Stubbs Company uses the perpetual inventory method and the weighted-average cost flow method. On January 1, Year 2, Stubbs purchased 1,150 units of inventory that cost $9.50 each. On January 10, Year 2, the company purchased an additional 600 units of inventory that cost $6.00 each. If the company sells 1,300 units of inventory for $19 each, what is the amount of gross margin reported on the income statement? (Round your intermediate calculations to two decimal places.):
$13,910 Average cost per unit = Total cost of the inventory available ÷ Total number of units available Average cost per unit = [(1,150 × $9.50) + (600 × $6.00)] ÷ 1,750 = $8.30 per unit Cost of goods sold = 1,300 × $8.30 = $10,790Gross margin = Sales − Cost of goods sold Gross margin = $24,700 − $10,790 = $13,910
Warren Company began the accounting period with a $54,000 debit balance in its accounts receivable account. During the accounting period, the company recorded revenue on account amounting to $120,000. The accounts receivable account at the end of the accounting period contained a $27,000 debit balance. Based on this information, what is the amount of cash collected from customers during the period?
$147,000 Beginning balance of accounts receivable + Sales on account − Collections on account = Ending balance of accounts receivable $54,000 + $120,000 - Cash collected on account = $27,000 Cash collected on account = $147,000
The following account balances were taken from the adjusted trial balance of Kendall Company: see photo What is the Retained Earnings account balance that will be included on the post-closing trial balance?
$19,900 Ending retained earnings = Beginning balance + Revenues − Expenses − Dividends Ending retained earnings = $17,000 + $22,400 − $15,000 − $4,500 = $19,900
On January 1, Year 1, Raven Limo Service, Incorporated paid $64,000 cash to purchase a limousine. The limo was expected to have a six-year useful life and a $10,000 salvage value. On January 1, Year 5, the limo was sold for $30,000 cash. Assuming Raven uses straight-line depreciation, the Company would recognize a
$2,000 gain
On January 1, Year 2, Chavez Company had beginning balances as follows: total assets of $12,500, total liabilities of $4,500, and common stock of $3,000. During Year 2, Chavez paid dividends to its stockholders of $2,000. Given that retained earnings amounted to $6,000 at the end of Year 2, what was Chavez's net income for Year 2?
$3,000 On January 1, Year 2:Assets = Liabilities + Common Stock + Retained Earnings$12,500 = $4,500 + $3,000 + Retained Earnings- Retained Earnings = $5,000 During Year 2:Beginning retained earnings + Net income − Dividends = Ending retained earnings$5,000 + Net Income − $2,000 = $6,000- Net Income = $3,000
During the current year, Gomez Company had beginning inventory of $1,300 and ending inventory of $900. The cost of goods sold was $3,700. What is the amount of inventory purchased during the year?
$3,300 Beginning inventory + Purchases − Cost of goods sold = Ending inventory$1,300 + Purchases − $3,700 = $900Purchases = $900 + $3,700 − $1,300 = $3,300
The trial balance of Barger Company at the end of the accounting period, immediately prior to recording closing entries, showed the following: see photo What will the balance of the retained earnings account be after the closing entries are recorded?
$30,600 Closing entries move all current year data from the temporary accounts (revenues, expenses, and dividends) into the retained earnings account. Ending retained earnings = Beginning retained earnings + Revenues − Expenses − Dividends. Ending retained earnings = $15,800 + $62,000 − $44,900 − $2,300 = $30,600.
The inventory records for Radford Company reflected the following: Beginning inventory @ May 1100 units @ $4.00 First purchase @ May 7300 units @ $4.40 Second purchase @ May 17500 units @ $4.60 Third purchase @ May 23100 units @ $4.80 Sales @ May 31900 units @ $7.80 If the company uses the weighted-average inventory cost flow method, what is the average cost per unit (rounded) for May?
$4.50 Average cost per unit = Total cost of the inventory available ÷ Total number of units available Average cost per unit = [(100 × $4.00) + (300 × $4.40) + (500 × $4.60) + (100 × $4.80)] ÷ 1,000 units = $4.50 per unit
On October 1, Year 1, Jason Company paid $2,700 to lease office space for one year beginning immediately. What is the amount of rent expense that will be reported on the Year 1 income statement and what is the cash outflow from rent that would be reported on the Year 1 statement of cash flows?
$675; $2,700 Monthly rent expense = Payment of $2,700 ÷ 12 months = $225 per month Rent expense (on the income statement) = $225 per month × 3 months = $675The $2,700 payment is the cash outflow from rent that will be reported on the statement of cash flows.
Madison Company owned an asset that had cost $44,000. The company sold the asset for $16,000. Accumulated depreciation on the day of sale amounted to $32,000. Which of the following would be reported in the financial statements?
A $16,000 cash inflow in the investing activities section of the cash flow statement.
Assuming the entries used to record the disbursements and to replenish the fund are combined, which of the following is included in the entry to replenish a petty cash fund?
A credit to Cash
Benson Company purchased land and paid the full purchase price in cash. Which of the following would be included in the journal entry necessary to record this event?
A debit to Land and a credit to Cash
Which of the following financial statements provides information about a company as of a specific point in time?
Balance sheet
What account is used to record the amount of cash shortages or overages relative to a petty cash system?
Cash Short and Over
Which of the following appears in the investing activities section of the statement of cash flows?
Cash outflow for the purchase of land
Which of the following is an example of revenue?
Cash received from customers at the time services were provided
At the time of liquidation, Fairchild Company reported assets of $206,000, liabilities of $94,000, common stock of $84,000 and retained earnings of $28,000. What is the maximum amount of Fairchild's assets that the shareholders are entitled to receive?
Creditors receive first priority in asset distribution during a business liquidation. Therefore, creditors would collect the $94,000 owed to them, leaving the shareholders with the remaining $112,000 ($84,000 common stock + $28,000 retained earnings).
What is the term used to describe the left side of a T-account?
Debit Side
Assume a company paid $690 for a computer that it plans to sell to its customers. Suppose that as a result of new technology the company could buy the same computer today for $400. what would the journal entire look like to show the inventory at the lower of cost or market?
Debit to Cost of Goods Sold for $290 and credit to Inventory for $290
Tetra Company uses the perpetual inventory system and a FIFO cost flow method. On January 1, the company purchased 2,000 units of inventory that cost $4.00 each. On January 12, the company purchased an additional 3,000 units of inventory at a cost of $4.20 each. On January 20, Tetra Company sold 4,000 units of inventory. What would the journal entre look like to recognize the cost of goods sold on that date?
Debit to Cost of goods sold for $16,400 and a credit to Inventory for $16,400
Which of the following types of accounts is closed at the end of an accounting cycle?
Dividends
Which type of accounting information is intended to satisfy the needs of external users of accounting information?
Financial accounting
At the end of Year 1, the following information is available for Grumpy, Happy, and Doc Companies: see photo Which company has the highest level of debt risk?
Grumpy
What does the accounts receivable turnover ratio measure?
How quickly accounts receivable turn into cash
At a time of declining prices, which inventory cost flow method will result in the highest ending inventory?
LIFO
Nelson Company experienced the following transactions during Year 1, its first year in operation. 1.Acquired $9,600 cash by issuing common stock. 2.Provided $5,900 of services on account. 3.Paid $2,500 cash for operating expenses. 4.Collected $3,700 of cash from customers in partial settlement of its accounts receivable. 5.Paid a $280 cash dividend to stockholders. What is the amount of net income that will be reported on the Year 1 income statement?
Net income = Revenue of $5,900 − Expenses of $2,500 = $3,400
How is the net income percentage calculated?
Net income divided by net sales
Glebe Company accepted a credit card account receivable in exchange for $1,100 of services provided to a customer. The credit card company charges a 5% fee for handling the transaction. What effect will the collection of cash from the credit card company have on the elements of the financial statements?
None of these answer choices are correct
Which of the following errors would cause the debit side of a trial balance to be larger than the credit side?
None of these answer choices would cause the debit side of the trial balance to be larger than the credit side.
When a company establishes a petty cash fund:
One asset account increases, and another asset account decreases.
While performing its monthly bank reconciliation, the bookkeeper for Mosaic Company discovered that a check written for $421 for advertising expense was recorded in the firm's books as $241. Which of the following shows the effect of the correcting entry on the financial statements? see photo
Option B
What is the purpose of the accrual basis of accounting?
Recognizing revenue when it is earned and expenses when they are incurred, regardless of when cash changes hands.
Which of the following adjustments would not be described as an accrual?
Recording insurance expense relating to insurance premiums that were paid in advance.
Which of the following is not one of the common elements that are typically present when fraud occurs?
The assistance of others
How would the trial balance column totals be affected if a $600 credit to Service Revenue was erroneously posted as a $600 debit to Salaries Expense?
The debit column of the trial balance would be $1,200 more than the credit column. Because the error would cause the debit column to be overstated by $600 and the credit column to be understated by $600. The difference between the two column totals would be $1,200.
Which of the following should be the main determinant for selection of the allocation method for long-term operational assets?
The method that best matches the pattern of asset use.
Which of the following circumstances would be a valid reason to estimate the amount of inventory that is on hand at the end of the period?
To test for financial statement manipulation
The following pre-closing accounts and balances were drawn from the records of Carolina Company on December 31, Year 1: See Photo What is the amount of total assets that will be reported on the balance sheet as of December 31, Year 1?
Total assets = Cash of $2,400 + Land of $1,500 + Accounts receivable of $1,200 = $5,100
If retained earnings decreased during the year, and no dividends were paid, which of the following statements must be true? a. Expenses for the year exceeded revenues. b. Liabilities increased during the year. c. Total stockholders' equity decreased. d. The company did not have enough cash to pay its expenses.
a. Expenses for the year exceeded revenues.
Which of the following accounts normally has a debit balance? a. Prepaid Insurance b. Accounts Payable c. Common Stock d. Unearned Service Revenue
a. Prepaid Insurance
Which of the following statements regarding credit entries is true? a. Credits decrease liability accounts. b. Credits increase the common stock account. c. Credits increase asset accounts. d. Credits increase asset and common stock accounts and decrease liability accounts.
b. Credits increase the common stock account.
Which of the following accounts is increased with a credit? a. Dividends b. Accounts Receivable c. Common Stock d. Prepaid Rent
c. Common Stock
Smith Company sold merchandise for $3,000 cash. Assume the event is subject to a state sales tax of 9%. Recognizing the event will require Smith to (ignore any effects associated with the recognition of cost of goods sold)
increase revenue, increase liabilities, and increase assets
The adjusting entry required to recognize warranty expense will cause
liabilities to increase and equity to decrease
If total assets decrease, then
liabilities, common stock, or retained earnings must decrease.
Zack's, Incorporated sold land that cost $85,000 for $70,000 cash. What will happen as a result of this event
total assets decreased