210 quizzes

erps Books in College Park, Maryland sells books and other supplies to students. The state sales tax rate in College Park, Maryland is 6 percent. Terps Books collects the sales tax from its customers on each sale, and periodically remits the sales tax to the state of Maryland. On January 1, 2020, Terps Books had a beginning balance of $250,000 for Sales Tax Payable. During the year ended December 31, 2020, Terps Books collected in cash $750,000 of sales tax from its customers and remitted $600,000 of sales taxes to the State of Maryland. The balance in Terps Books Sales Tax Payable account as of December 31, 2020 is $ and the impact of these transactions on the Income Statement of Terps Books for the year ended December 31, 2020 is $ . - $150,000 and $750,000 - $0 and $0 - $400,000 and $0 - $150,000 and $0

$400,000 and $0

On June 1, 2021, The Stones Company received $100,000 of cash by borrowing from First National Bank under a Note Payable. The note payable has an annual interest rate of 12%. The note payable specifies that the principal and all interest on the note payable will be paid to First National Bank at the end of the one year term of the note payable on May 31, 2022. In the financial statements of The Stones Company, what is the Interest Payable balance for this Note Payable as of December 31, 2021; and what is the amount of Interest Expense for this note payable for the year ended December 31, 2021?' - $12,000 Interest Payable and $12,000 Interest Expense - $0 Interest Payable and $0 Interest Expense -$6,000 Interest Payable and $6,000 Interest Expense - $7,000 Interest Payable and $7,000 Interest Expense

$7,000 Interest Payable and $7,000 Interest Expense

On January 1, 2020, Racine Company purchased equipment that cost $55,000 for cash. The equipment has an expected useful life of six years and an estimated salvage value of $4,000. Assuming that Racine depreciates its assets under the straight-line method: What is the amount of annual depreciation expense for this equipment and what is the amount of accumulated depreciation for this equipment on Racine's balance sheet as of December 31, 2021? - $8,500 annual depreciation expense and $8,500 accumulated depreciation - $9,167 annual depreciation expense and $18,334 accumulated depreciation - $9,167 annual depreciation expense and $9,167 accumulated depreciation - $8,500 annual depreciation expense and $17,000 accumulated depreciation

$8,500 annual depreciation expense and $17,000 accumulated depreciation

Beta Company purchased a forklift at a total cost of $25,000 on January 1, 2019. Management of Beta Company determined that the forklift has a useful life of 5 years and a salvage value of $5,000. On January 1, 2022, Beta Company sold this forklift for $12,000 cash. What was the book value of the forklift on the date of sale, and what was the amount of the gain or (loss) on sale of the forklift? - $10,000 Book Value and Gain on Sale of $2,000 - $17,000 Book Value and a Loss on Sale of $2,000 - $25,000 Book Value and a Loss on Sale of $10,000 - $13,000 Book Value and a Loss on Sale of $1,000

- $13,000 Book Value and a Loss on Sale of $1,000

On January 1, 2020, ABC Company had a $100,000 balance in Accounts Receivable and a $5,000 balance in the Allowance for Doubtful Accounts. During the year ended December 31, 2020, ABC Company: (1) sold $500,000 of merchandise on account; (2) collected $200,000 cash from account receivables; (3) wrote-off accounts receivable balances from two customers totaling $3,000 after all collection efforts had been exhausted; and (4) recorded bad debt expense and increased the allowance for doubtful accounts in the amount needed to have a $10,000 balance in the allowance for doubtful accounts as of December 31, 2020. ABC Company management made the estimate that its allowance for doubtful accounts should be $10,000 as of December 31, 2020 based on its review of its aged accounts receivable schedule as of December 31, 2020. The balance in ABC's accounts receivable as of December 31, 2020 before reduction for the allowance for doubtful accounts; and the amount of ABC's bad debt expense recorded in its income statement for the year ended December 31, 2020 are: - $397,000 and $8,000 - $297,000 and $3,000 - $397,000 and $10,000 - $400,000 and $10,000

- $397,000 and $8,000

Otis Company's merchandise inventory at the beginning of the year on January 1, 2021 was $200,000. During the year ended December 31, 2021, Otis completed the following events: (1) purchased $500,000 of merchandise inventory; (2) paid freight-in costs to have the inventory it purchased shipped to Otis' offices of $50,000; and (3) sold merchandise that had a cost of goods sold of $250,000.What was Otis' balance in its merchandise inventory account on December 31, 2021? - $500,000 - $450,000 - $300,000 -$700,000

- $500,000

On January 1, 2020, Bay Company had a $3,000 balance in Accounts Receivable and a $200 balance in the Allowance for Doubtful Accounts. During the year ended December 31, 2020, Bay Company: (1) sold $25,000 of merchandise on account; (2) collected $21,000 cash from account receivable; and (3) estimated that 2% of it sales on account made during the year ended December 31 2020 would be uncollectible. Bay Company did not write-off any accounts receivable balances during the year ended December 31, 2020.The balances in Bay Company's accounts receivable and allowance for doubtful accounts as of December 31, 2020 should be: - $28,000 and $200 - $7,000 and $700 - $7,000 and $700 - $7,000 and $500

- $7,000 and $700

On June 1, 2020, Siebens Enterprises loaned $20,000 to Tyler Company for one year at an annual interest rate of 6 percent. Under the terms of the promissory note, Tyler Company will repay the principal and pay one year's interest on May 31, 2021.Related to this note receivable, what amount of interest income would Siebens report in its statement of income for the year ended December 31, 2020? - $700 -$1,200 - $600 -$0

- $700

On September 30, 2020, James Company paid $12,000 cash to rent office space for the one-year period from October 1, 2020 to September 30, 2021. In its financial statements as and for the year ended December 31, 2020, James Company 's 2020 would report $_______ of Prepaid Rent and $_________ of rent expense. - $9,000 and $3,000 - $6,000 and $6,000 -$12,000 and $3,000 - $12,000 and $0

- $9,000 and $3,000

The net realizable value of accounts receivable is calculated as - 365/Accounts Receivable - Accounts Receivable + Uncollectible Accounts Expense - Accounts Receivable + Notes Receivable - Accounts Receivable - Allowance for Doubtful Accounts

- - Accounts Receivable - Allowance for Doubtful Accounts

Schumacher Company completed the following transactions during the year ended December 31, 2020:1) Started the business by issuing common stock for $7,500 cash2) Paid cash to purchase $5,000 of inventory3) Sold inventory that cost $3,000 for $7,250 cash4) Incurred and paid operating expenses of $250 Schumacher's merchandise inventory balance as of December 31, 2020 is: - $0 - $11,150 -$2,250 - 2,000

- 2,000

The Book Company received a cash payment of $100,000 from one of its clients on October 31, 2021. This payment is for services that The Book Company will provide to the client evenly over the 6 month period from November 1, 2021 to April 30, 2022. At the time that the cash payment is received, The Book Company would record: - An increase in Cash of $100,000 and an increase in a Prepaid Revenue Asset of $100,000 - An increase in Cash of $100,000 and an increase in the Deferred Revenue Liability of $100,000 - No entry would be made - An increase in cash of $100,000 and an increase in Revenues of $100,000

- An increase in Cash of $100,000 and an increase in the Deferred Revenue Liability of $100,000

The recognition of an expense may be accompanied by which of the following? - An increase in assets - An increase in liabilities - A decrease in revenue - A decrease in liabilities

- An increase in liabilities

Gross margin is equal to -Inventory minus Cost of Goods Sold - Net Sales Revenue minus Operating Expenses - Net Sales Revenue minus Cost of Goods Sold - Net Sales Revenue divided by the balance in Merchandise Inventory at the end of the period

- Net Sales Revenue minus Cost of Goods Sold

The Statement of Cash Flows classifies cash flows by three categories: - inventory, accounts receivable and Dividends - Operating, investing and financing - operating, purchasing and investing - revenues, expense and net income

- Operating, investing and financing

Smith Company sold land it owned for $100,000 cash on July 1, 2020. Smith Company's statement of cash flows for the year ended December 31, 2020, would show this transaction as: - a $100,000 cash inflow from financing activities - a $100,000 cash outflow from financing activities - a $100,000 cash inflow from investing activities -a $100,000 cash inflow from operating activities

- a $100,000 cash inflow from investing activities

Which of the following would not be classified as a long-term asset? - delivery trucks - land -accounts receivable -equipment

- accounts receivable

The goals of Generally Accepted Accounting Principles (GAAP) for U.S. companies include all of the following, except - aggressive accounting to overstate assets -consistency - completeness - comparability

- aggressive accounting to overstate assets

Liabilities are shown on the -income statement - balance sheet -statement of cash flows - statement of changes in Stockholder's Equity

- balance sheet

about a company as of a specific point in time? - income statement -statement of Cash Flows - Statement of changes in stockholders' Equity - balance sheet

- balance sheet

Jones Company purchased a forklift on July 1, 2020 and recorded it as equipment in its balance sheet. Management determined that the forklift has a useful life of 5 years. On September 1, 2021, Jones Company paid $4,000 cash for parts and labor to improve the quality of the forklift. After the improvement, the quality of the forklift was improved, but the useful life of the forklift remained at management's original estimate of 5 years. Jones Company would record the $4,000 payment as follows: - decrease cash by $4,000 and increase repairs and maintenance expense by $4,000 - decrease cash by $4,000 and record a loss on sale of asset of $4,000 - Increase cash by $4,000 and decrease equipment by $4,000 - decrease cash by $4,000 and increase equipment by $4,000

- decrease cash by $4,000 and increase equipment by $4,000

Alpha Company acquired a forklift on January 1, 2020, which was recorded as an equipment asset on its balance sheet. On December 1, 2020, Alpha Company paid $400 cash to have routine maintenance and minor repairs performed on this forklift. Alpha Company would record the payment of $400 as follows: - decrease cash by $400 and record a loss on sale of equipment of $400 - decrease cash by $400 and increase accumulated depreciation - decrease cash by $400 and increase equipment by $400 - decrease cash by $400 and increase Repairs and Maintenance Expense by $400

- decrease cash by $400 and increase Repairs and Maintenance Expense by $400

Bad Debt Expense (also known as Uncollectible Accounts Expense) is recorded: - in the Statement of Income as an operating expense - as a cash inflow from customers in the Statement of Cash Flows - on the balance sheet as a reduction of accounts receivable - in the Statement of Income as cost of goods sold

- in the Statement of Income as an operating expense

Baxter paid $2,000 to ship merchandise from its offices to a customer. This $2,000 payment is - is deducted from net sales to calculate gross margin - recorded as an increase to inventory - recorded as a selling expense under operating expenses in the statement of income - recorded as an increase to cost of good sold

- recorded as a selling expense under operating expenses in the statement of income

During the year ended December 31, 2020, Strand completed the following events: (1) received $20,000 cash from the sale of stock; (2) sold $100,000 of inventory to customers on account; (3) collected $75,000 cash from accounts receivable; (4) purchased inventory on account for $100,000; and (5) paid $50,000 cash to reduce accounts payable. What was Strand's net cash flow from operating activities for the year ended December 31, 2020? -$45,000 -$75,000 -$25,000 -($30,00)

-$25,000

For the year ended December 31, 2021, revenue on account totaled $100,000; cash collections of accounts receivable totaled $50,000; and cash paid for operating expenses totaled $25,000. As of December 31, 2021, $25,000 of employee salaries were accrued. Net cash flows (i.e. cash inflows minus cash outflows) from operating activities for the year ended December 31, 2021 were: -$50,000 -$0 -$100,000 -$25,000

-$25,000

In connection with its purchase of equipment to be used in its factory, Able Company paid in cash for the following items: Purchase price of the equipment from the supplier of $300,000. Delivery costs to transport the equipment from the supplier to Able Company's factory of $20,000. Costs to install the equipment in Able Company's factory of $10,000. Costs to adapt the equipment for purposes of Able's intended use in its factory of $30,000. As a result of all of these transactions, what is the total amount recorded by Able Company as an increase to Equipment on its balance sheet? - $330,000 - $350,000 -$360,000 -$340,000

-$360,000

Styles Company's merchandise inventory at the beginning of the year on January 1, 2021 was $500,000. During the year ended December 31, 2021, Styles completed the following events: (1) purchased inventory in the amount of $400,000; (2) returned defective inventory that cost $50,000 to the company from which it was purchased and received a cash payment from that company of $50,000; and (3) sold inventory that cost $300,000.What was Style Company's balance in its merchandise inventory account as of December 31, 2021? -$600,000 -$50,000 -$100,000 -$550,000

-$550,000

As of the start of business on January 1, 2020, Montross Company had a cash balance of $400. During the year ended December 31, 2020, Montross earned $1,200 of cash revenue and paid $800 of cash expenses. The amount of cash shown on the December 31, 2020 balance sheet would be - $1,100 -$800 -$300 $2,400

-$800

Which of the following terms is applied to long-term assets that have no physical substance and provide rights, privileges and special opportunities to businesses? - Property, Plant and equipment - current Asset - Natural Resources -Intangible Asset

-Intangible Asset

Ruiz Company provided services for $15,000 cash during the year ended December 31, 2020. Ruiz incurred $12,000 of expenses on account during the year ended December 31, 2020, and by the end of the year, $3,000 of that amount had been paid with cash. Assuming that these are the only accounting events that affected Ruiz during the year ended December 31, 2020 and that Ruiz Company uses the accrual method of accounting, which of the following statements is correct. - The amount of net income shown on the income statement is $3,000. - The amount of net loss shown on the income statement is $3,000 - The amount of net income shown on the income statement is $9,000. - The amount of net cash flow from operating activities shown on the statement of cash flows is $6,000.

-The amount of net income shown on the income statement is $3,000.

All of the following are permanent accounts whose ending balances as of December 31, 2021 carry forward as the beginning balance for January 1, 2022 , except -retained earnings -cash -common stock -sales revenue

-sales revenue

On June 1, 2021, The Stones Company received $100,000 of cash by borrowing from First National Bank under a Note Payable. The accounting entry to record this transaction: - Decreases Cash $100,000 and increases Note Receivable $100,000 - No entry is made - Increases Cash $100,000 and Increases Note Payable $100,000 - Increases Cash $100,000 and Increases Interest Expense $10,000

Increases Cash $100,000 and Increases Note Payable $100,000

The purpose of the accrual basis of accounting is to: - Report revenue when received. - Match revenues and expenses in the proper period. - Improve the company's earnings per share - Report expenses when cash disbursements are made

Match revenues and expenses in the proper period.

On December 10, 2021, The Fish Company was awarded a contract for $250,000 to stock fish in the Potomac River during the period from January 2022 to March 2022. No cash was received by The Fish Company at the time it was awarded this contract. On December 10, 2021, The Fish Company should record the following related to this contract award: - No accounting entries should be made on December 10, 2021 - Increase revenues by $250,000 - Increase Accounts Receivable by $250,000 and increase the Deferred Revenue Liability by $250,000 - Increase Cash by $250,000 and increase Revenues by $250,000

No accounting entries should be made on December 10, 2021

Coldplay Company sells its products with a one-year parts and labor warranty. At the beginning of the year on January 1, 2020, Coldplay had a Warranty Payable balance of $25,000. During the year ended December 31, 2020, Coldplay had the following accounting events: (1) Coldplay sold products for $500,000 and estimated that its warranty expense related to these sales is $50,000; and (2) Coldplay paid $30,000 in cash to repair its products returned by customers under warranty. What should be the balance in Coldplay's Warranty Payable account as of December 31, 2020, and what should be the Warranty Expense recorded by Coldplay in its income statement for the year ended December 31, 2020? - Warranty Payable Balance $45,000 and Warranty Expense $50,000 - Warranty Payable Balance $50,000 and Warranty Expense $50,000 - Warranty Payable Balance $20,000 and Warranty Expense $30,000 - Warranty Payable Balance $75,000 and Warranty Expense $50,000

Warranty Payable Balance $45,000 and Warranty Expense $50,000

On December 1, 2021, The Sheeran Company received cash of $250,000 from borrowings from the First National Bank under a Note Payable. This transaction would be shown in The Sheeran Company's Statement of Cash Flows for the year ended December 31, 2021 as: - a cash inflow from financing activities - This transaction would not be shown on the Statement of Cash Flows. - a cash outflow from investing activities - a cash inflow from investing activities

a cash inflow from financing activities

Which of the following is not an accurate description of the Allowance for Doubtful Accounts? - an income statement account - an estimate of the amount of accounts receivable that will not be collected - a balance sheet account - a contra account

an income statement account

Lynx Company purchased $4,000 of merchandise on account and sold the merchandise to a customer for $7,000 cash. What is Lynx's gross margin and the net change in cash flow from operating activities as a result of these transactions? Gross Margin - Cash Flow from operating a. 7,000 , 4,000 inflow b. 3,000, 7,000 inflows c. 3,000, 7,000 inflow d. 4,000, 4,000 outflow

b.

On December 31, 2020, Sky Co. owed $15,000 in salaries to employees who had worked during December 2020, but would be paid in January 2021. If the accrued salaries year-end adjustment is properly recorded on December 31, 2020, what will be the effect of the adjustment on the following items for Farrell? net income cash inflow from operating. a. no effect , no effect b. Decrease, No effect c. Increase, Decrease d. No efect, Decrease

b.

ABC Company performed a physical inventory count on December 31, 2020, and costed its inventory quantities to calculate that its inventory balance as of December 31, 2020 should be $150,000. The inventory balance per ABC's December 31, 2020 pre-adjusted balance sheet is $160,000. The adjusting entry that should be made by ABC Company to state ABC's Company's inventory at its proper balance based on the physical count - decreases inventory by $10,000 and increases cost of goods sold by $10,000 - No adjustment is needed - increases inventory by $10,000 and decreases cost of goods sold by $10,000 - decreases inventory by $10,000 and increases selling expenses by $10,000

decreases inventory by $10,000 and increases cost of goods sold by $10,000

In accounting for a contingent liability, if the likelihood is probable that the contingent liability will become an actual liability, but the amount of the actual liability cannot be estimated, a company is required by GAAP to: -record a liability for the estimated loss contingency - record an asset in the amount of any potential gain from the contingency - disclose the loss contingency in the footnotes to its financial statements -record no liability and make no disclosures in the notes to the financial statements about the loss contingency

disclose the loss contingency in the footnotes to its financial statements

A cash payment repaying the principal amount borrowed from a bank under a note payable is reported on the statement of cash flows as a cash outflow from investing activities. t/f

false

A company expects to settle its Current Liabilities by receiving cash for these amounts within one year of the balance sheet date. t/f

false

A company that is the business of providing services (such as a law firm or accounting firm) reports gross margin on its income statement, whereas a company in the business of selling merchandise does not report gross margin on its income statement. t/f

false

Assuming that ABC Company made a loan to Tech, Inc. under a Note Receivable with an annual interest rate of 5 percent. Interest income on ABC's Note Receivable from Tech, Inc. increases the operating income of ABC Company. t/f

false

Companies that use accrual accounting recognize revenues and expenses at the time that cash is paid or received. t/f

false

Jones Company acquired a delivery truck for $40,000 on January 1, 2016. The management of Jones Company determined that the truck had a $0 salvage value and an estimated useful life of 5 years. Jones Company recorded deprecation expense annually for the years ended December 31, 2016, 2017, 2018, 2019 and 2020 of $8,000. As of December 31, 2020, the Jones Company has the following balances recorded in its balance sheet: Delivery truck $40,000 Less accumulated deprecation (40,000) equals Book value $0. The Jones Company continued to use the delivery truck in its business operations throughout the year ended December 31, 2021. Is the following statement True or False: For the year ended December 31, 2021, Jones Company should record $8,000 of depreciation expense related to this delivery truck. t/f

false

The net realizable value of accounts receivable is the amount of its receivables a company does not expect to collect. t/f

false

Fray Company has been sued by a customer who claims injury from use of Fray's product. Fray has engaged attorneys and consultants to assist its management in evaluating the status of this contingent liability. The company's lawyers and consultants have informed Fray's management that the likelihood that this contingent liability will become an actual liability is remote. What does GAAP require Fray to do regarding this contingent liability? - Fray must record a liability for this loss contingency in its balance sheet - nothing, Fray is not required to record a liability or disclose this loss contingency - Fray must disclose this loss contingency in the footnotes to its financial statements - Fray must report an allowance account on the balance sheet

nothing, Fray is not required to record a liability or disclose this loss contingency

which of the following accounts do not appear on the balance sheet? - cash - sales revenue - retained earnings - salaries payable

sales revenue

Varghese Company paid cash to purchase land. As a result of this accounting event.. -total assets decreased - none of these - total equity decreased -total assets were unaffected

total assets were unaffected

A deferral is a revenue or expense event that is recognized after cash has been exchanged t/f

true

A dividend paid to stockholders decreases retained earnings. t/f

true

GAAP (generally accepted accounting principles) permits companies to choose a method of accounting for their inventory flow from certain acceptable inventory flow alternatives. t/f

true

Gains on the sale of property, plant and equipment are reported as non-operating income on the income statement. t/f

true

Interest expense is presented in the Income Statement below Operating Income as a component of "Other Income/(Expense). t/f

true

The accounting equation can be stated in two ways. T/F Assets = Liabilities + Stockholders' Equity Assets - Liabilities = Stockholders' Equity

true

The cash inflow from the sale of inventory is reported in the operating activities section of the statement of cash flows. t/f

true

When Tiffany & Co. sells inventory for more than its cost, the difference between the sales revenue and the cost of goods sold is called the gross margin. T/F

true