Accounting Final

Which one of the following is not an external user of financial statements?

a. The Company's President

Which one of the following statements is true if a company's collection period for accounts receivable is unacceptably long?

a. The company may offer sales discounts to shorten the collection period.

Cash flows from acquiring and disposing of long-term assets are classified as

b. investing activities.

The cost of goods sold is equal to:

b. the cost of goods available for sale less ending inventory.

Cost of goods sold is equal to:

b. the cost of merchandise purchased plus transportation costs plus beginning inventory minus purchase returns and allowances and purchased discounts minus ending inventory.

Convertible bonds are attractive to bondholders because

b. they can be converted into stock at the bondholder's option.

During the bank reconciliation process, an accountant identified an error. A check written for $20 to pay a supplier for goods purchased on credit was erroneously recorded in the company's records for $200. Which of the following entries would correct this error?

c. Cash 180 Accounts Payable 180

A company issued $500,000 of bonds for $498,351. Interest is paid semiannually. The bond markets and the financial press are likely to report the bond issue price as:

c. 99.67

Which of the following statements regarding amortization is true?

c. Amortization of a premium continues over the life of the bond until the balance in the account is reduced to zero.

While preparing a bank reconciliation, which of the following items would be added to the bank statement balance?

c. Deposits in transit

Businesses engage in which of the following three main activity categories?

c. Financing, Investing, Operating

Which inventory costing method might allow a company to manipulate income by making significant inventory purchases at year end?

c. LIFO

Which of the following is not classified as a current liability account?

c. Note payable, due in 2 years

External users of financial information

c. Rely on the financial statements to help make informed decisions.

The financial statements are prepared after

c. The adjusted trial balance is prepared

A check returned by a bank because the issuer's cash account balance could not cover the check is called a(n)

d. NSF check

Balance sheet accounts are also known as which of the following?

d. Permanent accounts

Which of the following is the correct entry to establish a petty cash fund in the amount of $300?

a. Petty Cash Fund 300 Cash 300

Alco Roofing Company's beginning accounts receivable were $200,000 and ending accounts receivable were $270,000. During the period, credit sales totaled $570,000, How much cash was collected from customers?

a. $500,000

AT&U Company Data for the year ended December 31, 2012, are presented below: Sales (credit) $2,500,000 Sales returns and allowances 50,000 Accounts Receivable (December 31, 2012) 640,000 Allowance for Doubtful Accounts (Before adjustment at December 31, 2012) 20,000 Estimated amount of uncollected accounts based on aging analysis 45,000 Refer to AT&U Company. If the company estimates its bad debt to be 2% of net credit sales, what will be the balance in the Allowance for Doubtful Accounts account after the adjustment for bad debts?

a. $69,000

Allatoona Landing reported net credit sales of $1,250,000 and cost of goods sold of $900,000 for 2012. Its beginning balance of Accounts Receivable was $175,000. The accounts receivable balance decreased by $25,000 during 2012. Rounded to two decimal places, what is the company's accounts receivable turnover rate for 2012?

a. 7.69

While preparing a bank reconciliation, which of the following items would be subtracted from the balance per the bank statement?

a. Outstanding checks

The amount of cash in the cash register from sales totals $534. The amount for sales recorded on the cash register tape was $530. Which journal entry is required?

b. Cash in Bank 534 Sales 530 Cash Over and Short 4

In the reconciliation of a bank statement, deposits in transit should be:

b. added to the unadjusted bank statement balance.

Klump Co. Klump Co. uses a perpetual inventory system and had the following inventory transactions for the month of June. June 1 On hand, 50 units at $18.00 each, $900 4 Purchases 115 units at $18.20 each, $2,093.00 5 Sold 100 units 10 Purchased 75 units at $18.25 each, $1,368.75 24 Sold 40 units Total cost of goods available for sale $4,361.75 30 On hand, 100 units Refer to the information provided for Klump Co. If the company uses the LIFO inventory costing method, cost of goods sold for the month of June is:

b. $2,550.00

While preparing a bank reconciliation, which of the following items would be subtracted from the balance per the company records?

b. Bank service charges

Which one of the following is an accurate description of the Allowance for Doubtful Accounts?

b. Contra Account

What should a company do to improve its accounts receivable turnover rate?

b. Give customers credit terms of 2/10, n/30 rather than 1/10, n/30.

What is unearned revenue?

b. Liability

The control activity "segregation of duties" is most effective in:

b. Preventing collusion

Metalcrafts Inc. Selected information from the company's financial records is presented below: Equipment, December 31, 2013 $300,000 Equipment, December 31, 2014 400,000 Accumulated depreciation, December 31, 2013 80,000 Accumulated depreciation, December 31, 2014 60,000 During 2014, the company sold equipment with a cost of $50,000 and accumulated depreciation of $30,000. A gain of $10,000 was recognized on the sale of the equipment. This was the only equipment sale during the year. Refer to Metalcrafts, Inc. What was depreciation expense for 2014?

c. $10,000

What will be the increase in the Paid-in capital in excess of par account if a corporation issues 20,000 shares of $1.00 par common stock for $6 per share?

c. $100,000

While preparing the February 28th bank reconciliation, the accountant identified the following items: Company's balance according to the general ledger $23,100 Outstanding checks 550 Interest earned on the checking account 100 A customer's NSF check returned by the bank 1,000 In the process of preparing the reconciliation, the accountant discovered an error in recording a customer's check; the amount was incorrectly recorded on the books as a cash receipt of $600, while the bank correctly recorded the amount as $650. What is the company's adjusted cash balance on February 28th?

c. $22,250

A company had sales of $40,000, sales discounts of $800, sales returns of $1,600 and commissions owed to sales people of $600. Compute net sales.

c. $37,600

The total amount of interest that will be paid on a 5-year, $90,000 note payable at 11% simple annual interest is?

c. $49,500

Presented below is the operating activities section of a statement of cash flows for 2014: Operating activities: Net income $120,000 Add: Depreciation 10,000 Decrease in accounts receivable 5,000 $135,000 Deduct: Decrease in accounts payable 15,000 Net cash inflow from operating activities $120,000 Which method of preparing the operating activities section was used?

c. The indirect method.

If the balance on the bank statement does not equal the balance per the company's records, then it can be assumed that:

c. There will be items reconciling the difference.

Goodwill can be recorded as an asset when a(n)

c. business is purchased and payment is made in excess of the value of the net assets.

The effect of recording depreciation for the year is a(n)

c. decrease in assets and a decrease in net income.

On January 2, Alfredo Corporation sold merchandise with a gross price of $100,000 to a customer with terms of 2/10, n/30. How much Sales Discounts would be recorded if payment was received from the customer on January 8? Assume the company uses the Gross Method of recording receivables.

d. $2,000

Beaver Tree Service Beginning Retained Earnings $550,000 Ending Retained Earnings 700,000 Dividends Paid 100,000 Revenue 525,000 Refer to Beaver Tree Service. What is the company's net income?

d. $250,000

AT&U Company Data for the year ended December 31, 2012, are presented below: Sales (credit) $2,500,000 Sales returns and allowances 50,000 Accounts Receivable (December 31, 2012) 640,000 Allowance for Doubtful Accounts (Before adjustment at December 31, 2012) 20,000 Estimated amount of uncollected accounts based on aging analysis 45,000 Refer to AT&U Company. If the company uses the aging of accounts receivable approach to estimate its bad debts, what will be the net realizable value of its accounts receivable after the adjustment for bad debt expense?

d. $595,000

A company receiving payment of a $20,000 accounts receivable within 10 days with terms of 2/10, n/30, would record a sales discount of:

d. 2% of $20,000

Failure to record depreciation expense for the period results in which of the following?

d. Both a and c

Gainesville Truck Center This company has a weekly payroll of $10,000 for its employees who work Monday through Friday. Federal and state income taxes are withheld in the amounts of $1,700 and $400, respectively, and FICA taxes are withheld at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare). In addition, the federal and state unemployment taxes are applied at rates of 2% and 5%, respectively. The company's year-end is December 31. Refer to Gainesville Truck Center. Which of the following statements is true regarding the entry to record wages and the related liabilities?

d. Social security tax payable will be credited in the amount of $620.

Income statement accounts are also known as which of the following?

d. Temporary accounts

Coffski, Inc. sold merchandise to a customer on credit. The invoice amount was $1,000; the invoice date was June 10th; credit terms were 1/10, n/30. Which of the following statements is true?

d. The customer should pay $1,000 if the invoice is paid on July 9th.

The Premium on Bonds Payable account is shown on the balance sheet as

d. a separate valuation account that increases the bond liability to market value at the issue date

When is a liability for dividends created?

d. at the date of declaration.

Land is not depreciated because it

d. will provide future benefits for a company for an unlimited period of time.

What is the name for a person who lends funds to a business entity and expects repayment with interest?

d. Creditor

When a firm borrows money, one effect on the accounting equation is a(n)

d. increase in assets.

Credit entries are used to

d. increase liability accounts

Accumulated Depreciation

d. increases with a credit.

When bonds are sold for less than the par amount, this means that the

d. stated rate of interest is less than the yield rate of interest.

Depreciation is a process by which

d. the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset.

A non-classified balance sheet typically does not have a distinction between which of the following items?

d. Current and Noncurrent items

Which one of the following is not a proper method of recognizing assets as expenses in a particular accounting period?

d. Customers' account balances in accounts receivable are assigned to expense in the period in which each customer pays.

Which one of the following adjustments will increase assets?

d. Rent revenue is recorded for amounts owed by a tenant but not yet paid.

Hesson Properties, Inc. The following transactions occurred during June: June 1 Purchased two new maintenance carts on account at $750 each. Payment is due in 30 days. June 8 Accepted $500 of advance payments from customers for services to be provided next month. June 15 Received the utility bill for $300. Payment is due in 30 days. June 20 Billed customers $1,500 services provided. Payment is due in 30 days. June 30 Received $500 from customers who were billed earlier. Refer to Hesson Properties. What journal entry is required to record the utility bill?

a. Utilities Expense 300 Accounts Payable 300

Metalcrafts Inc. Selected information from the company's financial records is presented below: Equipment, December 31, 2013 $300,000 Equipment, December 31, 2014 400,000 Accumulated depreciation, December 31, 2013 80,000 Accumulated depreciation, December 31, 2014 60,000 During 2014, the company sold equipment with a cost of $50,000 and accumulated depreciation of $30,000. A gain of $10,000 was recognized on the sale of the equipment. This was the only equipment sale during the year. Refer to Metalcrafts, Inc. Assume that all purchases of equipment were paid with cash. How much cash was paid to purchase equipment during 2014?

a. $150,000

Barnes Restaurant reports the following amounts: Cash $125,000 Inventory $215,000 Land 275,000 Unearned Revenue 117,000 Equipment 350,000 Common Stock 300,000 Calculate Current Assets.

a. $340,000

A company purchased land and incurred the following costs: Purchase Price $500,000 Excavation Costs 50,000 Razing Old Building 12,500 Broker Fees 10,000 Cost of a Parking Lot 25,000 What is the cost of the land?

a. $572,500

GT Company has $200 in cash, $500 in accounts receivable, and $700 in inventory. The company also has $200 in accounts payable and $200 in unearned sales revenue. What is the company's quick ratio?

a. 1.75

Fireworks City Information for 2012 and 2011 is presented below for this company which uses the straight-line depreciation method. 2012 2011 Property, plant and equipment $250,000 $190,000 Accumulated depreciation 100,000 85,000 Depreciation expense 62,500 47,500 Net sales 1,000,000 900,000 Total assets 625,000 475,000 Refer to Fireworks City. Determine the asset turnover ratio for 2012.

a. 7.84 times

Payment is made for machinery purchases previously on credit. What effect does this transaction have on the accounting equation?

a. Assets and liabilities decrease.

On January 1, 2012, a company sold a machine for $5,000 that it had used for several years. The machine cost $11,000, and had accumulated depreciation of $4,500 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine?

a. Loss of $1,500

When using the indirect method to determine operating cash flows, where is the gain from selling a long-term investment recognized? (The proceeds from selling the investment are considered separately.)

a. Operating activity

Which of the following is one of the elements of stockholders' equity?

a. Retained earnings

How is the Balance Sheet linked to the other financial statements?

a. Retained earnings is reported on the Balance Sheet.

A company wishes to issue $600,000 of 10-year, 6.8% bonds, with interest paid annually at the end of the year. The market rate of interest is currently 5%. What information is needed in order to determine the selling price?

a. The face value of the bonds, the stated rate of interest, the market rate of interest, and the bond life.

If a corporation declares a 2-for-1 stock split, which of the following is true?

a. The par value will be reduced to half of the pre-split par value.

Which of the following statements is true?

a. The posting of an amount recorded in the general ledger can be verified by referring to the account number listed in the posting reference column on that line in the general journal.

When a corporation issues a stock dividend, which of the following is true?

a. Total stockholders' equity remains the same.

If technology changes rapidly, a firm should

a. consider an accelerated rate of depreciation.

Cash flows from issuing and repurchasing stock or issuing and repaying debt are classified as

a. financing activities.

When bonds are issued by a company, the accounting entry shows an

a. increase in assets and an increase in liabilities.

If a company's bonds are callable,

a. the issuing company is likely to retire the bonds before maturity if the bonds are paying 8% interest while the market rate of interest is 4%.

The chronological record in which transactions are initially recorded in the order in which they occur is called a(n)

c. Journal

Assets become expenses when?

d. Their economic benefits expire.

Fabian Woodworks This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2012, and was used 27,000 hours in 2012 and 26,000 hours in 2013. Refer to Fabian Woodworks. If the company uses the units-of-production method, what is the depreciation rate per hour for the equipment?

b. $.10

Klump Co. Klump Co. uses a perpetual inventory system and had the following inventory transactions for the month of June. June 1 On hand, 50 units at $18.00 each, $900 4 Purchases 115 units at $18.20 each, $2,093.00 5 Sold 100 units 10 Purchased 75 units at $18.25 each, $1,368.75 24 Sold 40 units Total cost of goods available for sale $4,361.75 30 On hand, 100 units Refer to the information provided for Klump Co. If the company uses the LIFO inventory costing method, ending

b. $1,811.75

Fabian Woodworks This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2012, and was used 27,000 hours in 2012 and 26,000 hours in 2013. Refer to Fabian Woodworks. What amount will be reported as depreciation expense over the 5-year life of the equipment?

b. $10,000

Which of the following statements is false?

b. A statement of retained earnings reports the amount of cash received from operating activities and the amount of cash paid for dividends.

Which of the following is not an investing activity?

b. Sale of merchandise for cash.

Hesson Properties, Inc. The following transactions occurred during June: June 1 Purchased two new maintenance carts on account at $750 each. Payment is due in 30 days. June 8 Accepted $500 of advance payments from customers for services to be provided next month. June 15 Received the utility bill for $300. Payment is due in 30 days. June 20 Billed customers $1,500 services provided. Payment is due in 30 days. June 30 Received $500 from customers who were billed earlier. Refer to Hesson Properties. What journal entry is required to record the purchase of the carts?

c. Equipment 1,500 Accounts Payable 1,500

A sporting goods chain purchased supplies at a cost of $11,000 during the year. At January 1, the beginning balance in the supplies account was $3,000. At December 31, supplies on hand are $800. Determine supplies expense for the year.

c. $13,200

Klump Co. uses a perpetual inventory system and had the following inventory transactions for the month of June. June 1 On hand, 50 units at $18.00 each, $900 4 Purchases 115 units at $18.20 each, $2,093.00 5 Sold 100 units 10 Purchased 75 units at $18.25 each, $1,368.75 24 Sold 40 units Total cost of goods available for sale $4,361.75 30 On hand, 100 units Refer to the information provided for Klump Co. If the company uses the FIFO inventory costing method, cost of goods sold for the month of June is:

c. $2,538.00

General Lighting During the first quarter of 2012, the company sold 4,000 batteries on credit for $150 each plus state sales tax of 6%. Refer to General Lighting. Sales taxes are required to be paid to the state taxing authority at the end of the quarter. What is the amount of the current liability related to this transaction?

c. $36,000

A corporation began operations on October 1, 2014, with 3,000 shares of $2 par common stock authorized. The company issued common stock on several occasions during 2014 and 2015. On December 31, 2015, the company repurchased 1,000 shares of its outstanding shares and then reissued 500 of these shares on March 1, 2016. On June 1, 2016, the company's board of directors declared a 2-for-1 stock split. As a result of this stock split, which of the following is true?

c. Total stockholders' equity remained the same.

Bonds sell at a premium when the

c. market rate of interest is less than the stated interest rate at the time of issue.

Treasury shares represent the

c. number of previously issued shares that have been repurchased by the corporation.

Cash flows from acquiring and selling products are classified as

c. operating activities.

The principle of conservatism is concerned with

c. the avoidance of overstating assets or income in the preparation of financial statements.

A credit means

c. the event had an effect on the right side of the T-account.

General Lighting During the first quarter of 2012, the company sold 4,000 batteries on credit for $150 each plus state sales tax of 6%. Refer to General Lighting. Sales taxes are required to be paid to the state taxing authority at the end of the quarter. Which of the following records the sale of the batteries?

d. Accounts Receivable 636,000 Sales Revenue 600,000 Sales Tax Payable 36,000

Kaleidoscope Paint On January 1, 2013, this company issued $500,000, 10-year, 9% bonds for $480,745. The bonds pay interest on June 30 and December 31. The market rate is 10%. The company plans to use the effective interest method of amortizing bond discounts and premiums. Refer to Kaleidoscope Paint. The interest expense on the bonds at June 30, 2013, is

d. $24,037

Fabian Woodworks This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2012, and was used 27,000 hours in 2012 and 26,000 hours in 2013. Refer to Fabian Woodworks. If the company uses the straight-line method of depreciation, what is the book value at December 31, 2014?

d. $6,000

Which of the following terms best describes a distribution of the net income of a corporation to its owners?

a. Dividends

Fabian Woodworks This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2012, and was used 27,000 hours in 2012 and 26,000 hours in 2013. Refer to Fabian Woodworks. Based on the information presented above, what method of depreciation will maximize depreciation expense in 2012?

a. Double-declining-balance

Services are provided for customers who pay for their services immediately. What effect does this transaction have on the accounting equation?

a. Assets and retained earnings increase.

What is the impact on the accounting equation of recording the issuance of a short-term note payable?

a. Both assets and liabilities increase.

Happy Heights Country Club Selected accounts at July 31 are provided below: CASH 7/1 bal. 12,000 7/3 1,000 7/5 3,600 7/7 1,800 UNEARNED TUITION REVENUE 7/3 1,000 ACCOUNTS RECEIVABLE 7/2 3,600 7/7 1,800 MEMBERSHIP REVENUE 7/2 3,600 7/5 3,600 Refer to Happy Heights Country Club. On which date did the country club sell a club membership on account?

a. July 2nd

Which of the following lease conditions would result in a capital lease to the lessee?

d. The lessee can purchase the property for $1 at the end of the lease term.

Failure to record the supplies used during the year would result in which of the following?

b. Assets and Stockholders' equity being overstated

Which one of the following items is reported as a current stockholders' equity on a classified balance sheet?

b. Common Stock

Which inventory costing method results in the highest inventory balance during a period of rising purchase prices?

b. FIFO

What effect does "recognizing revenue at the end of the accounting period for rent previously received in advance" have on the accounting equation for the insurance company?

b. Liabilities decrease and Stockholders' equity increases.

A company purchased equipment for $150,000 cash. What is the effect on total assets?

b. No net effect

When a corporation declares a cash dividend, which of the following is true?

b. Stockholders' equity decreases.

Ladder Distributors The stockholders' equity section of the December 31, 2014, balance sheet is provided below: Common Stock, $30 par, 20,000 shares issued and outstanding $600,000 Paid-in Capital in Excess of Par--Common Stock 240,000 Retained Earnings 700,000 Total Stockholders' Equity $1,540,000 Assume that all of the 20,000 shares of stock that was issued as of December 31, 2014, was issued for $42 per share. On March 1, 2015, the company reacquired 4,000 shares of its common stock for $50 per share. Refer to Ladder Distributors. How much should be reported on the company's March 31, 2015, balance sheet for treasury stock?

c. $200,000

Parlato Corp. has an inventory turnover rate of 8 times. Calculate the company's average days to sell inventory.

c. 45.625

Which of the following statements is true?

c. If all transactions are correctly posted to the general ledger, the sum of the accounts with debit balances should be equal to the sum of the accounts with credit balances.

All of the following accounts have normal credit balances except

c. Inventory

Which of the following financing activities results in a cash inflow?

c. Issuing bonds

The balance in the retained earnings account represents

d. accumulated earnings that have not been distributed to stockholders.

Which one of the following is a correct fundamental accounting equation?

d. Assets = Liabilities + Stockholders' Equity

A company reported net income for the current year. Which of the following business transactions would cause its cash from operating activities to be higher than its net income?

d. Depreciation expense was recorded for the year.

Which financial statement would you analyze to assess a firm's operating performance for the past year?

d. Income Statement

Which balance sheet accounts are most affected by investing activities?

d. Long-term assets.

A current liability includes obligations which must be repaid

c. within one year or within the operating cycle, whichever is longer.

Which of the following sets of factors is needed to calculate depreciation on plant and equipment?

b. The estimated life of the asset, its acquisition cost, and its estimated residual value

d. accumulated earnings that have not been distributed to stockholders.

b. Total stockholders' equity will increase by $5,000.

Depreciation is

d. an effort to achieve proper matching of the cost of operating assets with related revenues.

Cash flows from borrowing and paying off a 90-day bank loan are classified as

d. financing activities.

The going concern assumption is concerned with

c. the company's ability to continue operations long enough to carry out its existing obligations.

On January 01, 2013, Kale Farms purchased a tractor for $20,000. The company signed a 6% installment note to pay off the debt with 48 monthly payments over four years. Each payment is $469.70. How much interest must be paid over the life of the loan?

d. $2,545.60