Financial Accounting Practice Final

85. Sheridan Company buys land for $125,000 on 12/31/16. As of 3/31/17, the land has appreciated in value to $133600. On 12/31/17, the land has an appraised value of $136700. By what amount should the Land account be increased in 2017?

$0

10. As of December 31, 2017 Stoneland Corporation has assets of $3,500 and stockholders' equity of $2,000. How much are the liabilities for Stoneland Corporation as of December 31, 2017?

$1,500

34. At December 31, 2017, before any year-end adjustments, McCarty Company's Prepaid Insurance account had a balance of $2,700. It was determined that $1,500 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be.

$1,500

65. Springer Company listed outstanding checks totaling $4,500 on its September bank reconciliation. In October, the company issued checks totaling $45,700. The October bank statement shows that checks totaling $39,800 cleared the bank. The outstanding checks on the October bank reconciliation should total

$10,400

54. Kam Company has the following units and costs: Units Unit Cost -Inventory, January 1 8,000 $11 -Purchase, June 19 13,000 $12 -Purchase, November 8 5,000 $13 If 9,000 units are on hand at December 31, what is the cost of the ending inventory under LIFO using a periodic inventory system?

$100,000

123. What is the present value of $200,000 to be received in 15 years if interest rates are 4%, compounded annually?

$111,052

57. Kam Company has the following units and costs: Units Unit Cost -Inventory, January 1 8,000 $11 -Purchase, June 19 13,000 $12 -Purchase, November 8 5,000 $13 If 9,000 units are on hand at December 31, what is the cost of the ending inventory under FIFO using a periodic inventory system?

$113,000

46. Assume that sales revenue are $450,000, sales discounts are $10,000, net income is $35,000, and cost of goods sold is $320,000. How much are gross profit and operating expenses, respectively?

$120,000 and $85,000

122. You want to save enough money to make a down payment on a new home. You decided to put $10,000 into a savings account at the end of each of the next ten years. If you earns 4% compound interest, how much money will he have at the end of the ten years?

$120,061

100. On January 1, Anthony Corporation issued $1,000,000, 14%, 5-year bonds with interest payable on December 31. The bonds sold for $1,072,096. The market rate of interest for these bonds was 12%. On the first interest date, using the effective-interest method, how much is the debit entry to Bond Interest Expense?

$128,652

66. A company has the following items at year end: cash on hand, $1,000; cash in a checking account, $3,000; cash in a savings account, $5,000; postage stamps, $50; and Treasury bills, $10,000 that mature in less than 90 days. How much should the company report as cash and cash equivalents on its balance sheet?

$19,000

124. What is the present value of a series of receipts of $20,000 per year for the next 20 years, if the interest rate is 8% compounded annually?

$196,363

89. Equipment with a cost of $864,600 has an estimated salvage value of $55,000 and an estimated life of 4 years or 17600 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 4400 hours?

$202,400

77. How much accrued interest should be reported on the payee's December 31 balance sheet on a $5,000, 8%, 9-month note receivable issued on June 1?

$233

81. Corristan Company purchased equipment and incurred these costs: -Cash price $24,000 -Sales taxes 1,200 -Insurance during transit 200 -Annual maintenance costs400 Total costs $25,800 What amount should be recorded as the cost of the equipment?

$25,400

78. Butte Co. loaned $25,000 to Beavis Co. on June 1, at 12% interest for 3 months. How much interest revenue will Butte Col recognize in June?

$250

90. On April 1, 2017, La Presa Company sells some equipment for $18,000. The original cost was $50,000, the estimated salvage value was $8,000, and the expected useful life was 6 years. On December 31, 2016, the Accumulated Depreciation account had a balance of $29,400. How much is the gain or loss on the sale?

$2600 loss

119. Taylor Enterprises sold a piece of equipment for $3000 in cash. The original cost was $15,000, and the accumulated depreciation prior to the sale was $10,000. What amount would appear in the investing activities section of the statement of cash flows?

$3,000

93. Buttner Company borrows $88,500 on September 1, 2017, from Harrington State Bank by signing an $88,500, 12%, one-year note. How much is accrued interest at December 31, 2017?

$3,540

40. Pharaoh Consulting uses the cash basis of accounting and a fiscal year end of December 31. Beginning on September 1, 2016 Pharaoh performs services for Concord International at a rate of $6,200 per month. On February 12, 2017, Concord pays Pharaoh $31,000 in full for all services rendered from September 1, 2016 to January 31, 2017. How much revenue would Pharaoh recognize in 2017 on its cash-basis income statement?

$31,000

75. During 2017, Patterson Wholesale Company had net credit sales of $750,000. On January 1, 2017, Allowance for Doubtful Accounts had a credit balance of $18,000. During 2017, $30,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage-of-receivables basis). If the accounts receivable balance at December 31 was $200,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2017?

$32000

How much is the future value of $10,000 in 12 years which earns 11% interest?

$34,984.50

48. If beginning inventory is $60,000, cost of goods purchased is $380,000, sales revenue is $800,000 and ending inventory is $50,000, how much is cost of goods sold?

$390,000

86. A purchase of equipment for $18,000 also involves freight charges of $500 and installation costs of $2,500. The estimated salvage value and useful life are $2,000 and 4 years, respectively. Under the straight-line method, how much is annual depreciation expense?

$4,750

4. The financial statements for Harold Corporation contained the following information: Accounts receivable $5,000 Sales revenue 75,000 Cash 15,000 Salaries and wages expense 20,000 Rent expense 10,000 How much was Harold's net income?

$45,000

88. Given the following account balances at year-end, how much are total intangible assets on the balance sheet of Alisha Enterprises? -Sales revenue $45,000,000 -Cash 1,500,000 -Accounts receivable 4,000,000 -Land 15,000,000 -Equipment 25,000,000 -Trademarks 1,000,000 -Goodwill 4,500,000 -Research & development 2,000,000

$5,500,000

109. A corporation shows the following account balances: -Retained earnings $300,000 -Treasury stock 10,000 -Dividends payable 20,000 -Paid-in capital in excess of par value 55,000 -Common stock 200,000 How much is total stockholders' equity?

$545,000

67. Jones Company collected the following information to prepare its May bank reconciliation: -Cash balance per books, May 31 $5,300 -Deposits in transit 510 -Notes receivable with interest collected by bank 580 -Bank service charges 30 -Outstanding checks 180 -NSF check 150 How much is the adjusted cash balance per books on May 31?

$5700

95. Bonds with a face value of $600,000 and a quoted price of 102.25 have a selling price of

$613, 500

52. At December 31, 2017, Sunrise Company's inventory records indicated a balance of $752,000. Upon further investigation it was determined that this amount included the following: -$112,000 in inventory purchases made by Sunrise shipped from the seller December 27, 2016 terms FOB destination, but not due to be received until January 2, 2017 -$74,000 in goods sold by Sunrise with terms FOB destination on December 27. The goods are not expected to reach their destination until January 6, 2017 -$6,000 of goods received on consignment from Wallwood Company What is Sunrise's correct ending inventory balance at December 31, 2017?

$634,000

79. The company has the following account balances at the end of 2017: Accounts Receivable $642,000; Allowance for Doubtful Accounts: $2,000; Bad Debt Expense: $17,000. What is the value of net Accounts Receivable on the balance sheet?

$640,000

44. A credit sale of $750 is made on June 13, terms 2/10, n/30, on which a return of $50 is granted on June 16. What amount is received as payment in full on June 23?

$686

71. On June 15, Kersee Company sold merchandise on account to Eng Co. for $1,000, terms 2/10, n/30. On June 20, Eng Co. returns merchandise worth $300 to Kersee Company. On June 24, payment is received from Eng Co. for the balance due. What is the amount of cash received on June 24?

$686

92. ABC Company borrows $70,000 from Local Bank for five months at 9% on September 1. What is the value of the Note Payable account on September 1 at the time of borrowing?

$70,000

74. Net credit sales for the month are $4,000,000 for Marx Clothiers. Its accounts receivable balance is $160,000. The allowance is calculated as 7.5% of the receivables balance using the percentage of receivables basis. The Allowance for Doubtful Accounts has a credit balance of $5,000 before adjustment. How much is the balance of the allowance account after adjustment?

$7000

58. Kam Company has the following units and costs: Units Unit Cost -Inventory, January 1 5,000 $8 -Purchase, June 19 15,000 $10 -Purchase, November 8 20,000 $12 If 7,000 units are on hand at December 31, what is the cost of the ending inventory under average-cost method in a periodic inventory system?

$75,250

6. Saira's Maid Service began the year with total assets of $120,000 and stockholders' equity of $40,000. During the year the company increased its liabilities by $50,000. Total assets at the end of the year were $215,000. How much was stockholders' equity at the end of the year?

$85,000

83. Coronado Company purchased land for $80,000. The company also paid $12,000 in accrued taxes on the property, incurred $5,000 to remove an old building, and received $2,000 from the salvage of the old building. At what amount will the land be recorded in the accounting records?

$95,000

50. A company has the following balances: Sales revenue $312,000; Sales Returns and Allowances $2,000; Sales Discounts $4,000; Cost of Goods Sold $184,000; Operating Expenses $84,000. How much is the profit margin?

12.2 %

43. When credit terms of 1/15, n/60 are offered, how long is the discount period?

15 days

129. Calculate profit margin for a company that has net sales of $720,000, gross profit of $352,000 and net income of $108,000.

15%

87. Monthly depreciation expense of $600 is recorded on a truck that was purchased for $27,000 and has a $3,000 estimated salvage value. How much is the annual depreciation rate?

30%

108. A corporation is authorized to sell 1,000,000 shares of common stock. Today there are 400,000 shares outstanding, and the board of directors declares a 10% stock dividend. How many shares will be issued as a stock dividend?

40,000

128. Calculate times interest earned for a company with interest expense of $100,000, Income tax expense of $120,000, and Net Income of $300,000.

5.2 times

113. How are cash dividends paid to stockholders classified on the statement of cash flows? a. Financing activities b. Operating activities c. Investing activities d. Stockholders activities

A

114. In order to determine net cash provided by operating activities, a company must convert net income a. From an accrual basis to a cash basis b. From a cash basis to an accrual basis c. From historical cost basis to fair value basis d. From historical cost basis to pro forma basis

A

115. When a company is in financial distress, the company is more likely to have a. Positive cash flow from investing b. Positive cash flow from operations c. Positive cash flow from financing

A

116. What is the typical relationship between cash flow from operations and net income? a. Cash flow from operations is generally more than net income b. Cash flow from operations is generally the same as net income c. Cash flow from operations is generally less than net income d. Cash flow from operations is generally unrelated to net income

A

120. The following cash transactions occurred at Orange Peels -Corporation during 2017. What is cash flow for investing and cash flow for financing for the company: -Sale of land $100,000 -Sale of equipment 50,000 -Issuance of common stock 70,000 -Purchase of equipment 30,000 -Payment of cash dividends 60,000 a. $120,000 in net investing cash flow; $ $10,000 in net financing cash flow b. $180,000 in net investing cash flow; $ 130,000 in net financing cash flow c. $$180,000 in net investing cash flow; $10,000 in net financing cash flow d. $60,000 in net investing cash flow; $70,000 in net financing cash flow.

A

125. Compound interest is the return on principal a. Plus interest for two or more periods b. For one period c. Only d. For one or more periods

A

51. Which of the following should not be included in the physical inventory of a company? a. Goods held on consignment from another company b. Goods in transit from another company shipped FOB shipping point c. All of the answer choices are correct d. Goods shipped on consignment to another company

A

61. Which of the following is not an element of the fraud triangle? a. Segregation of duties b. Rationalization c. Opportunity d. Financial pressure

A

73. How is the account Allowance for Doubtful Accounts classified? a. A contra-asset account on the balance sheet b. A contra-liability account on the balance sheet c. An expense account on the income statement d. A contra-revenue account on the income statement

A

98. Kant Corporation retires its $100,000 face value bonds at 105 on January 1, following the payment of interest. The carrying value of the bonds at the redemption date is $103,745. Which of the following is part of the entry to record the bond redemption?

A credit of $1,255 to Gain on Bond Redemption

42. Jax Company uses a perpetual inventory system and on November 30 purchased merchandise for which it must pay the shipping charges. Which of the following is one part of the required journal entry when Jax pays the shipping charges of $200?

A debit to Inventory for $200

28. On January 14, Metlock, Inc. purchased supplies of $450 on account. The entry to record the purchase will include.

A debit to Supplies and a credit to Accounts Payable

96. If the market interest rate for a bond is higher than the stated interest rate, the bond will sell at

A discount

12. A company purchased a tract of land on which it expects to build a production plant in approximately five years. During the five years before construction, the land will be idle. In what classification should the land be reported?

A long-term investment

18. What is the primary criterion by which accounting information can be judged?

Accounting information is useful for decision making

25. Which of the following is the correct sequence of events

Analyze a transaction; record it in the journal; post it to the ledger; create a trial balance

19. Generally accepted accounting principles (GAAP)

Are accounting rules that are recognized as a general guide for financial reporting

110. Which of the following does not affect retained earnings a. Net loss b. Additional investment by stockholders c. Dividends d. Net Income

B

112. Which of the following is an operating activity? a. Payment of a cash dividend b. Payment of interest c. Sale of equipment d. Making a loan to another entity

B

55. Inventory is on the books of the company at its cost of $1000. The inventory has decreased in value, so that its market value today is $800. Which of the following is true? a. The company makes no immediate entry and records cost of goods sold of $800 and inventory impairment of $200 when the inventory is sold. b. The company records inventory impairment of $200 immediately and the Inventory account declines to $800. c. The company records cost of goods sold of $200 immediately and the inventory account declines to $800. d. The company makes no immediate entry, and records cost of goods sold at $1,000 when the inventory is sold. 56. Which of the following would most likely employ the specific identification method of inventory

B

59. Which of these transactions would cause the inventory turnover ratio to increase the most? a. Keeping the amount of inventory on hand constant but decreasing sales b. Decreasing the amount of inventory on hand and increasing sales c. Keeping the amount of inventory on hand constant but increasing sales d. Increasing the amount of inventory on hand.

B

60. Which of the following is not an inventory account? a. Work in process b. Equipment c. Finished goods d. Raw materials

B

68. On which financial statement(s) will cash be reported? a. Only the statement of cash flows b. Balance sheet and the statement of cash flows c. Income statement and the statement of cash flows d. Income statement, balance sheet, and the statement of cash flows

B

69. Which of the following would not be an example of good cash management? a. Providing discounts to customers to encourage early payment. b. Investing temporary excess cash into the stock of a small company c. Carefully monitoring payments so that payments are not made too early d. Employing just-in-time inventory methods to keep inventory low.

B

80. Eddy Corporation had an increase in its accounts receivable turnover between 2016 and 2017. Which of the following could be true? a. There was a recession and credit customers are paying more slowly in 2017. b. The company has shifted its highest risk customers into a cash-payment-only status. c. The company has had an increase in accounts receivable's ending balance although sales remain the same. d. The average collection period is longer.

B

84. Which of the following is not properly classified as property, plant, and equipment? a. Building used in ordinary business operations b. A truck held for resale by an automobile dealership. c. A car used as a shuttle for customers using repair services at an automobile dealership d. A Building used as a factory

B

91. Which of the following is a current liability? a. Note payable due in 2 years. b. Prepaid Rent c. Accounts Receivable d. Unearned passenger ticket revenue

B

101. Which of the following is not a characteristic of a corporation? a. Unlimited liability for stockholders b. Easy transfer of ownership interests c. Ability to acquire capital easily d. Separate legal existence.

C

103. Harrison, Inc. issued 600 shares of common stock at $10 per share. If the stock was no-par value stock, which of the following will be part of the journal entry to record the issuance? a. Debit to Cash for $600 b. Credit to Paid-in Capital in Excess of Par for $600 c. Credit to Common Stock for $6,000 d. Debit to Paid-in Capital $6,000

C

127. Who is most interested in a company's current ratio a. Competitors b. Long-term creditors c. Short-term creditors d. Stockholders

C

53. Which of the following is true of the FIFO Inventory method? a. It assumes that the cost of the earliest units purchased are the last to be allocated to cost of goods sold. b. It assumes that the cost of the earliest units purchased are the last to be allocated to the beginning inventory. c. It assumes that the cost of the earliest units purchased are the first to be allocated to cost of goods sold. d. It assumes that the cost of the earliest units purchased are the first to be allocated to the ending inventory.

C

56. Which of the following would most likely employ the specific identification method of inventory costing? a. Hardware store b. Gasoline station c. Jewelry store d. Grocery store

C

94. Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called

Callable Bonds

11. When current assets are presented in order of liquidity, the following order would be used

Cash, accounts receivable, inventories, prepaid insurance.

31. If revenues are recognized only when a customer pays, what method of accounting is being used?

Cash-basis

45. What type of accounts are Sales Returns and Allowances and Sales Discounts?

Contra revenue accounts

97. On January 1, 2017, Slice Corp. issues $200,000 of 5-year, 7% bonds at face value. Which one of the following is one effect of the entry to record the issuance of the bonds?

Credit to Bonds Payable for $200,000

39. If service for $200 had been performed but not billed, the adjusting entry to record this service provided to a customer would include a:

Credit to Service Revenue for $200

16. Working Capital is

Current Assets - Current Liabilities

102. DT Inc. issued 3,000 shares of $5 par value common stock for $6 per share. Which of the following is one part of the journal entry to record the issuance? a. Debit to Paid-in Capital in Excess of Par Value for $3,000 b. Credit to Common Stock for $18,000 c. Debit to Cash for $15,000 d. Credit to Common Stock for $15,000

D

105. Which one of the following decreases when a corporation purchases treasury stock? a. Issued shares b. Treasury shares c. Authorized shares d. Outstanding shares

D

106. A corporation has the following account balances: -Common Stock, $1 par value $50,000 -Paid-in Capital in Excess of Par Value $2,500,000 Based on this information which of the following is true? a. Number of shares outstanding is 2,550,000 b. Average price per share issued is $5.10 c. Legal capital is $2,550,000 d. Number of shares issued is 50,000

D

107. On which date are entries for cash dividends required? a. Record date and the payment date b. Declaration date, record date, and payment date c. Declaration date and the payment date d. Declaration date and the record date

D

111. Which type of activity is the purchase of equipment for cash? a. A non-cash investing activity in the notes b. A financing activity c. An Operating activity d. Investing activity

D

118. 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? a. Decrease in accounts payable b. Increase in inventory c. Gain on sale of equipment d. Depreciation expense

D

62. Which of the following is a reason why an organization establishes a system for internal control? a. To safeguard its assets. b. To increase efficiency of operations c. To ensure compliance with laws and regulations. d. All of these answer choices are correct.

D

72. Oscar Company has identified that Bob Cook's receivable account of $100 is uncollectible. What is the journal entry needed to write off the account under the allowance method?

Debit-Allowance for Doubtful Accounts $100 Credit-Accounts Receivable $100

76. A 90-day promissory note is issued on September 15. What is the note's maturity date?

Dec 14

3. Which of the following would not appear on the income statement?

Dividends Paid

15. Which of the following is a measure of profitability?

Earnings per share

63. Handly Inc. permits only designated personnel such as cashiers to handle cash receipts. What principle is being applied?

Establishment of responsibility

17. What is the primary accounting standard-setting body in the United States?

Financial Accounting Standards Board (FASB)

49. Which of the following is not considered in computing net cost of purchases?

Freight paid on goods shipped to customers

126. Common size financial statements divide a. Income statement accounts by net sales b. Income statement accounts by total assets c. Balance sheet accounts by total stockholders' equity d. Balance sheet accounts by net sales

Income statement accounts by net sales

5. In which of the following sequences are the financial statements usually prepared?

Income statement, retained earnings statement, balance sheet, and statement of cash flows

23. Debits

Increase assets and decrease liabilities

21. The effect of performing services for cash on the basic accounting equation is to

Increase assets and increase stockholders' equity

36. In the closing process total revenues are determined to be $4,740 while total expenses are determined to be $3,875 and total dividends are $1,150. The retained earnings account will:

Increase by $865 due to net income

38. Marigold Tables paid employee wages on and through Friday, January 26, and the next payroll will be paid in February. There are three more working days in January (29-31). Employees work 5 days a week and the company pays $940 a day in wages. What will be the adjusting entry to accrue wages expense at the end of January?

Increase salaries and wages payable by $2,820.

22. A utility company accepts a deposit from a new customer and records it as unearned revenue. This affects the basic accounting equation by

Increasing an asset and increasing a liability

35. On August 1, Luang Corporation signed a $30,000, 14% 2-year note to help finance renovations being made to the corporation's headquarters. Assuming interest is accrued only when the year ends on December 31, the appropriate journal entry for the first year would be

Interest Expense $1,750 Notes Payable $1,750

27. The purpose of the ledger is to

Keep in one place all information about changes in specific account balances

82. Which of the following is not a depreciable asset a. Equipment b. Buildings c. Land d. Land Improvements

Land

Accounts with normal credit balances include

Liabilities and stockholders' equity

130. What information is needed to calculate the price-earnings ratio? a. Market price per share and earnings per share b. Net income and Stockholders' equity c. Market price per share and net income d. Market capitalization and Stockholders' equity

Market price per share and earnings per share

8. The segment of a corporation's annual report that describes the corporation's accounting methods is the

Notes to the financial statements.

47. Gross profit appears

On a multiple-step Income statement

13. A company purchased a tract of land on which it is building its headquarters. In what classification should the land be reported?

Property, plant, and equipment

2. A small neighborhood barber shop that is operated by its owner would likely be organized as a

Proprientorship

30. The primary purpose of the trial balance is to

Prove the equality of the debit and credit amounts after posting

7. The balance sheet

Reports the assets, liabilities, and stockholders' equity at a specific date.

64. At Emerson Company, one bookkeeper prepares the cash deposits while the other bookkeeper enters the collections in the journal and ledger. Which of the following is the best explanation of this type of internal control principle over cash receipts?

Segregation of duties.

37. Which account will have a zero balance after a company has journalized and posted closing entries?

Service Revenue.

99. Liquidity ratios measure a company's

Short term debt paying ability

33. Ignatenko Company purchased office supplies costing $5,000 and debited Supplies for the full amount. Supplies on hand at the end of the accounting period were $1,300. The appropriate adjusting journal entry to be made would be:

Supplies Expense $3,700 Supplies $3,700

41. When a company uses a perpetual inventory system,

The company increases the Inventory account when inventory is purchased

117. The company is preparing a reconciliation of net income to cash flow from operations. What is the effect of an increase in Accounts Receivable?

The increase in accounts receivable is deducted from net income

26. A complete journal entry does not show

The new balance in the accounts affected by the transaction

104. For what reason might a company acquire treasury stock?

To reissue the shares to officers and employees under bonus and stock compensation plans

14. Which of the following is an example of an intangible asset?

Trademarks

Favorable tax treatment

Which of the following is not an advantage of the corporate form of business organization?

20. All of the following are qualities of useful information except a. Flexibility b. Relevance c. Faithful representation d. Verifiability

a. Flexibility

9. An annual report includes all of the following except a. An auditor's report. b. A listing of all of the stockholders. c. A management discussion and analysis section. d. Notes to the financial statements.

b. A listing of all of the stockholders.

32. In 2017 Costello Company performs work for a customer and bills the customer $10,000; it also pays expenses of $3,000. The customer pays Costello in 2018. If Costello uses the accrual-basis of accounting, then Costello will report

b. Revenue of $10,000 in 2017

70. As used in a bank reconciliation, how are deposits in transit handled? a. Deducted from the bank balance b. Added to the book balance c. Added to the bank balance d. Deducted from the book balance.

c

29. A trial balance will not balance if a. A $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45 b. A correct journal entry is posted twice c. A $100 cash dividend is debited to Dividends Declared for $1,000 and credited to Cash for $100 d. The purchase of supplies on account is debited to Supplies and credited to Cash.

c. A $100 cash dividend is debited to Dividends Declared for $1,000 and credited to Cash for $100