Practice Test #1

On September 1, Kennedy Company loaned $138,000, at 13% annual interest, to a customer. Interest and principal will be collected when the loan matures one year from the issue date. Assuming adjustments are only made at year-end, what is the adjusting entry for accruing interest that Kennedy would need to make on December 31, the calendar year-end?

$138,000 × 0.13 × 4/12 = $5,980

On November 1, Jasper Company loaned another company $150,000 at a 8% interest rate. The note receivable plus interest will not be collected until March 1 of the following year. The company's annual accounting period ends on December 31. The amount of interest revenue that should be reported in the first year is:

$150,000 × 0.08 × 60/360 = $2,000

If Bojana Tax Services' office supplies account balance on March 1 was $1,100, the company purchased $950 of supplies during the month, and a physical count of supplies on hand at the end of March indicated $1,200 unused, what is the amount of the adjusting entry for office supplies on March 31?

1100+950-1200 =$850

Echo Company has assets of $606,000, liabilities of $253,000, and equity of $353,000. It buys office equipment on credit for $78,000. What would be the effects of this transaction on the accounting equation?

Assets increase by $78,000 and liabilities increase by $78,000.

On May 31, the Cash account of Tesla had a normal balance of $6,600. During May, the account was debited for a total of $13,800 and credited for a total of $13,100. What was the balance in the Cash account at the beginning of May?

Beginning Cash Balance + Debits − Credits = Ending Cash BalanceBeginning Cash Balance + $13,800 − $13,100 = $6,600Beginning Cash Balance + $700 = $6,600; Beginning Balance = $5,900 debit balance

Use the information in the adjusted trial balance presented below to calculate the current ratio for Wicked Wicker Company:

Current Ratio = Current Assets/Current Liabilities

The Retained earnings account has a credit balance of $44,000 before closing entries are made. Services revenue for the period is $62,200, wages expense is $43,300, and dividends are $11,800. What is the correct closing entry for the revenue accounts?

Debit Services Revenue $62,200; credit Income Summary $62,200.

A bookkeeper has debited an asset account for $4,100 and credited a liability account for $2,300. Which of the following would be an incorrect way to complete the recording of this transaction:

Debit another asset account for $1,800.

At the end of the current year, James Company reported total liabilities of $305,000 and total equity of $105,000. The company's debt ratio was:

Debt Ratio = Total Liabilities/Total Assets Debt Ratio = $305,000/$410,000*; Debt Ratio = 0.744 = 74.4%*Total Assets = Total Liabilities + Total Equity Total Assets = $305,000 + $105,000; Total Assets = $410,000

A company made no adjusting entry for accrued and unpaid employee salaries of $7,700 on December 31. Which of the following statements is true?

It will understate expenses and overstate net income by $7,700.

At the beginning of the year, Sigma Company's balance sheet reported Total Assets of $222,000 and Total Liabilities of $17,100 and Common stock of $68,400. During the year, the company reported total revenues of $259,000 and expenses of $200,500. Also, dividends during the year totaled $54,000. Assuming no other changes to Retained earnings, the balance in the Retained earnings account at the end of the year would be:

Retained Earnings = Assets - Liabilities - Paid in capital Help !!!!

On January 1, a company purchased a five-year insurance policy for $2,900 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:

debt ratio=current liab/current asset

On April 1, Garcia Publishing Company received $27,180 from Otisco, Incorporated for 36-month subscriptions to several different magazines. The company credited Unearned Revenue for the amount received and the subscriptions started immediately. Assuming adjustments are only made at year-end, what is the adjusting entry that should be recorded by Garcia Publishing Company on December 31 of the first year?

fees earned (27,180/38)*9<--because 9 months have passed =$6,795