Accounting Final
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 book value shown on the Year 2 Balance Sheet is
$28,000
At the end of the accounting period Anderson Company had $4,500 in Accounts Receivable and $500 in its Allowance for Doubtful Accounts account. Based on this information the Net Realizable Value of Accounts Receivable is
$4,000
On January 1, Year 1, Barnes Company issued a $100,000 installment note. The note had a 10-year term and an 8 percent interest rate. Barnes agreed to repay the principal and interest in 10 payments of $14,903 at the end of each year. How much of the first $14,903 payment was applied to interest in Year 1?
$8,000
Which of the following is a cost of selling merchandise on account?
All of the answers describe reasons companies accept credit cards from their customers.
Which one of the following shows how borrowing cash from creditors will affect a company's financial statements?
Asset = Liab. + Equity +FA + +
Which one of the following shows how acquiring cash from the issue of common stock will affect a company's financial statements?
Asset =. Liab. + Equity +FA. + +
The amount of Net Income shown on a Multi-step Income Statement will differ from the amount of Net Income shown on a Single-step Income Statement.
False
When the Accrued Interest Expense is paid:
Interest Payable will be decreased.
If Taha Company pays freight-in charges in cash, the Cash account is credited. Which account is debited?
Inventory
Which term describes assets earned from operations that have been reinvested into the business?
Retained Earnings
Knoll Company started Year 2 with the following balances: Cash $500 Supplies 500 Common Stock 1,000 During Year 2, the company experienced the following events. Paid $400 cash to purchase supplies Physical count revealed $100 of supplies on hand at the end of Year 2 Based on this information which of the following journal entries would be required to recognize supplies expense at the end of Year 2?
Supplies Expense 800 Supplies 800
If money is borrowed from a creditor at the beginning of an accounting period and both the principal and interest are paid in full during that same accounting period there will be no need to accrue interest expense.
TRUE
the higher the number of days to collect receivables, the greater the chance of lost income.
TRUE
A company using accrual accounting may report revenue on the Income Statement even if it does not collect cash.
True
Accrued interest expense will appear on the Income Statement but not on the Statement of Cash Flows.
True
The cash flow associated with buying and selling inventory is not affected by the inventory cost flow method. This statement is
True
If a company accrues Salary Expense in Year 1 and pays that expense in Year 2, in which year is the Income Statement affected?
Year 1
On January 1, Year 1, Barnes Company issued a $100,000 installment note. The note had a 10-year term and an 8 percent interest rate. Barnes agreed to repay the principal and interest in 10 payments of $14,903 at the end of each year. How much of the first $14,903 payment was applied to interest in Year 2?
a number less than $8,000
The cost of acquiring plant assets is:
capitalized as an asset
Instead of using cash to pay bills, many companies pay with checks because
checks facilitate the separation of duties associated with cash payments.
A Balance Sheet that displays assets and liabilities in Current versus Non-current categories is commonly called a:
classified balance sheet
Which of the following conveys an exclusive right to produce and sell the content contained in a textbook?
copyright
A deferral:
exists when a company pays cash before recognizing the associated expense.
The Current Ratio is calculated by:
dividing current assets by current liabilities.
The accounts receivable turnover ratio is calculated by
dividing the amount of credit sales by the average balance of Accounts Receivable.
The debt to assets ratio is calculated by
dividing total liabilities by total assets.
A line of credit normally has a fixed interest rate and a one year term to maturity. This statement is
false A line of credit usually has a variable rate of interest.
The adjusting entry to accrue interest expense will:
increase Interest Expense
Which of the following entities receives cash when a company borrows money through a bond issue?
issuer
When using an aging schedule to estimate bad debts requires two steps. Step one is:
multiply the account balance in each aging category by that category's percentage likelihood of non-payment, then total these amounts.
Depletion is the term used to recognize expense associated with
natural resources
To account for the recovery of goodwill, which account is debited?
none can't be restored only when sold
If a plant asset is purchased and the buyer incurs other acquisition costs such as transportation, if a quick payment discount is available, which costs are discounted?
purchase price only
The debt to asset ratio is a measure of
solvency
The percent of receivables allowance estimation method is a two step process. The first step calculates:
the ending balance of the Allowance account The first step is to determine the new balance of the Allowance account. The second step compares this new balance with the existing balance to determine the value that needs to badded to the Allowance account as well as the Uncollectible Accounts Expense for the period.
Each time a payment is made on an installment note, the portion of the next payment associated with notes payable increases. This statement is
true
Ledger accounts show beginning and ending balances
true
Which of the following shows how paying cash to purchase supplies will affect a company's financial statements?
-OA
Home Accessories' bank statement showed a $120 NSF check. Which of the following shows how recognizing this check will affect Home Accessories' financial statements?
-OA Accounts Receivable is increased and Cash is decreased for the NSF check. This leaves total assets unchanged. The Cash account is reduced due to operating activities.
Which of the following shows how paying cash for an insurance policy that protects the company for some future time period affects a company's financial statements?
-OA Paying cash for insurance to be used in a future period would increase the Prepaid Insurance asset account and decrease Cash. Therefore, total assets are unchanged. The cash outflow would appear in the Operating Activities section of the Statement of Cash Flows.
Weiss Company purchased two identical inventory items. The first purchase cost $30 and the second cost $32. The Company sold one of the items for $40. If the Company uses the weighted average cost flow method, the amount of gross margin shown on the income statement will be
9
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 double-declining-balance method, what is the Depreciation Expense for Year 1?
Asset 48000 x straight line rate 100/4 x double 2 = Year 1 depreciation 24000
The following table shows the operating cycle of four companies. Company Name. Smith. Jones Brown Green Operating Cycle. 48 days 42 days 51 days 46 days All other things being equal, the cost of borrowing money to purchase and hold inventory will be greater for:
Brown.
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.
Cash 960 Accounts Receivable 960
On December 31, Year 1, Kardashian Company recorded an adjusting entry to recognize uncollectible accounts expense. Kardashian had credit sales of $547,000 and estimates uncollectible accounts expense to be one percent of credit sales. Which one of the following shows how this entry will affect Kardashian's financial statements?
Cash Flow Assets= Liability+Equity Rev- Exp (5470) (5470) 5470
How would the payment of principal and interest appear on the Statement of Cash Flows?
Principal is a financing activity while Interest is an operating activity.
When a company incurs accrued expenses:
assets are not affected, stockholders' equity decreases, the liability account, such as Accounts Payable, increases
Clayton Company borrowed $6,000 from the State Bank on April 1, Year 1. The one-year note carried a 6% rate of interest. The loan and interest were paid when the note matured. What amount of Interest Payable should appear on Clayton's Year 2 Balance Sheet
$0 All interest is paid when the note matures so no Interest Payable remains at the end of Year 2.
Which of the following formulas is used to calculate the number of days to sell inventory?
365 ÷ Inventory turnover
If Taha Company pays freight-out charges in cash, the Cash account is credited. Which account is debited?
Freight Expense
Higher current ratios suggest greater liquidity
true
Many retail companies are motivated to incur credit costs because many customers are emotional buyers and offering credit generally leads to increases in sales revenue. This statement is
true
The term amortization is used to identify the expense recognition for intangible assets. This statement is
true
A cost may be recorded as an expense or as an asset purchase. This statement is
true if the cost provides the company benefit in a future accounting period it would be capitalized as an asset. If the item purchased is used up in the current accounting period it would be expensed.
An operating cycle is the length of time it takes to:
turn inventory into cash.
Which one of the following methods is usually employed for expensing natural resources?
units- of - production
Expenses are recognized:
when the petty cash fund is replenished.
If interest is accrued in Year 1 and paid in Year 2, when will the Interest Expense appear on the Income Statement?
year 1
If a customer pays for services in Year 1 but the services are not rendered until Year 2, when will the revenue be recognized?
year 2
When a company collects cash from accounts receivable:
total assets are not affected.
During its first year of operation, Cade Company experienced the following events: Issued common stock for $7,000 cash. Earned $5,000 of cash revenue. Paid $3,000 of cash expenses. Paid cash dividends amounting to $1,000. Before closing on December 31, the balance in the Retained Earnings account would be:
$0
Taha Company purchased inventory FOB shipping point and will sell that inventory FOB destination. This means Taha will pay freight-in and freight-out. Freight charges will be $100 each. Only the purchase takes place during the current accounting period. The sale takes place in a future accounting period. By what amount will the freight charges reduce Revenue in the calculation of Net Income for the current accounting period?
$0 If the inventory goes unsold during the current accounting period, the freight-in charges, like the cost to purchase inventory remains in the Inventory account. The value will appear on the Balance Sheet but not the Income Statement. If the sale takes place in a later accounting period, the freight-out charges are not incurred until a later accounting period. This too has no affect on the Income Statement.
Escrow Company's Multistep Income Statement shows Revenue of $100,000, a Gross Margin of $40,000, and Net Income of $10,000. What percentage of revenue is spent on selling and administrative expenses?
30%
Which one of the following shows how paying a cash dividend will affect a company's financial statements?
Asset = Liab. + Equity . -FA - -
Assume that there is $280 in expense vouchers and $20 in cash in the petty cash fund when it is replenished. Assuming the petty cash fund normally carries a $300 balance, which of the following shows how recognizing the replenishment of the petty cash fund will affect the financial statements?
Cash Flow Assets = Liability + Equity Rev- Exp -OA -280 -280 280
edwards Shoe Store sold shoes that cost the company $5,700 for $8,200. Which one of the following journal entries would be required to recognize the Cost of Goods Sold? (Ignore the effects of the associated revenue recognition.)
Cost of Goods Sold 5,700 Inventory 5,700
At the end of its Year 1 accounting period, Voss Company had a $35,000 balance in its inventory account. Even so, when the company took a physical count of the inventory, it found only $34,300 of inventory on hand. Which of the following journal entries would be required to recognize the inventory shrinkage?
Cost of Goods Sold 700 Inventory 700
Which of the following formulas is used to calculate the inventory turnover ratio?
Cost of goods sold ÷ Inventory
Garcia Company recognized revenue on account. The recognition will affect which of the following financial statements?
Income Statement and the Balance Sheet
The Gross Margin appears on a:
Multi-step Income Statement.
Which of the following statements regarding a general journal is false?
The amounts of debits and credits are shown in the same column.
The ledger contains
both permanent and temporary accounts.
A company can pay dividends only if it has a sufficient balance in _____ account
both the Cash and Retained Earnings
When a merchandising company sells inventory it will:
recognize revenue and expense.
When a company establishes a petty cash fund:
the amount of total assets is not affected.
During its first year of operation, Cade Company experienced the following events: Issued common stock for $7,000 cash. Earned $5,000 of cash revenue. Paid $3,000 of cash expenses. Paid cash dividends amounting to $1,000. After closing on December 31, the balance in the Retained Earnings account would be:
$1,000
Kilgore Company experienced the following events during its first accounting period: Issued common stock for $5,000. Earned $3,000 of cash revenue. Paid $4,000 cash to purchase land. Paid cash dividends amounting to $400. Paid $2,200 of cash expenses. Based on this information, the amount of cash flow from investing activities appearing on the Statement of Cash Flows is:
$4,000 outflow
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
Kilgore Company experienced the following events during its first accounting period: Issued common stock for $5,000. Earned $3,000 of cash revenue. Paid $4,000 cash to purchase land. Paid cash dividends amounting to $400. Paid $2,200 of cash expenses. The market value of the land at the end of the accounting period was $4,300. Based on this information, the amount of total assets appearing on the year-end balance sheet is:
$5,400
Amarillo Company experienced the following events during its first accounting period. Purchased $5,000 of inventory on account. Returned $1,000 of the inventory purchased in Event 1. Paid the remaining balance in Accounts Payable for the inventory purchased in Event 1. Sold inventory purchased in Event 1 for $5,000 to customers on account. At the end of the first accounting period what would be reported on for Net Operating Cash Flow on the Statement of Cash Flows?
(4000)
Amarillo Company experienced the following events during its first accounting period. Purchased $5,000 of inventory on account under terms 1/10/n30. Returned $1,000 of the inventory purchased in Event 1. Paid the remaining balance in Accounts Payable within the discount period for the inventory purchased in Event 1. Based on this information the journal entry necessary to record the purchase discount is: (A separate subsequent journal entry will be used to record the payment of the balance due on the account.)
Accounts Payable 40 Inventory 40
Which one of the following shows how recognizing accrued expense will affect a company's financial statements?
Asset = Liab. + Equity Rev. - Exp. + - +
Amarillo Company experienced the following events during its first accounting period. Purchased $5,000 of inventory on account under terms 1/10/n30. Returned $1,000 of the inventory purchased in Event 1. Paid the remaining balance in Accounts Payable within the discount period for the inventory purchased in Event 1. Based on this information, which one of the following shows how the recognition of the cash discount will affect the Company's financial statements? (Consider the affect of the recognition of the discount separately from the payment on account.)
Assets= Liabilities - -
Cassie Company's bank statement contained a $75 service charge. Which of the following shows how recognizing this charge will affect Cassie's financial statements?
Cash Flow Assets = Liability+ Equity Rev- Exp -OA -75 -75 75
Which one of the following statements regarding a Trial Balance is true?
The accounting records may contain errors even if the total amount of debit and credit balances are equal.
Normally a company closes its books and then adjusts its records to update the account balances before preparing the financial statements. This statement is
false Closing is performed after adjusting entries are made and financial statements are prepared.
The following pre-closing Trial Balance was drawn from the records of the Dakota Company. Account Title Debit Credit Cash $500 Equipment 2,000 Accounts Payable $1,000 Common Stock 700 Retained Earnings 600 Service Revenue 900 Operating Exp600 Dividends 100 Totals $3,200 $3,200 Based on the information in the Trial Balance, the post closing balance in the Retained Earnings account will be:
800
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 double-declining-balance method, what is the Depreciation Expense for Year 3?
Book Value 12000 x double straight-line rate 50% = 6000 $6,000 Depreciation Expense would bring the book value to $6,000, however that would be $2,000 lower than the $8,000 salvage value. Therefore, you can recognize only $4,000 of the 6000 calculated.
Yang Company recognized accrued salary expense. The recognition will affect which of the following financial statements?
Income statement and the balance sheet
Taha Company sold $8,000 of inventory under terms FOB shipping point. Freight out amounted to $200. All transactions were paid with cash. Is Taha responsible for the freight cost?
No
The balance sheet presents:
a list of a company's assets and the sources of those assets
The following Adjusted Trial Balance was drawn from the records of the Dakota Company. Account Title Debit Credit Cash $500 Equipment 2,000 Accounts Payable $1,000 Common Stock 700 Retained Earnings 600 Service Revenue 900 Operating Expense600 Dividends 100 Totals $3,200 $3,200 Based on the information in the Trial Balance, the total amount of the debit column is
higher than the total amount of assets that will appear on the balance sheet.
On December 31, Year 3, Alpha Company had an ending balance of $200,000 in its Accounts Receivable account and an unadjusted (current) balance in its Allowance for Doubtful Accounts account of $300. Alpha estimates Uncollectible Accounts Expense to be 1% of receivables. Based on this information, the amount of uncollectible accounts expense shown on the Year 3 income statement is
$1,700
At the end of its Year 1 accounting period, Voss Company had a $35,000 balance in its inventory account. Even so, when the company took a physical count of the inventory, it found only $34,300 of inventory on hand. Which of the following shows how recognizing the inventory shrinkage will affect the Company's financial statements?
Assets = Liabilities + Equity Rev - Exp - - +
Edwards Shoe Store sold shoes that cost the company $5,700 for $8,200. Which one of the following shows how the recognition of the Cost of Goods Sold will affect the Company's financial statement? (Ignore the effects of the associated revenue recognition.)
Assets = Liability + Equity (+ Rev -Expense) - - +
Who has priority in the event of a liquidation?
Creditors
Which of the following would not likely appear on a Classified Balance Sheet?
Current Retained Earnings
Point Company paid $4,000 cash to purchase a new machine. The company also paid $500 cash for an initial training cost that was necessary to teach an employee how to operate the machine. Which of the following represents the journal entry that would be necessary to record all capitalized costs related to the purchase of the machine?
Equipment 4,500 Cash 4,500
To account for the permanent impairment of Goodwill, which account is debited?
Impairment Loss
On October 1 of Year 1, Lesikar Company paid $1,200 cash for an insurance policy that would provide protection for a one year term. Which of the following adjusting entries would be required on December 31, Year 1 to recognize Insurance Expense?
Insurance Expense 300 Prepaid Insurance 300
Clayton Company borrowed $6,000 from the State Bank on April 1, Year 1. The one-year note carried a 6% rate of interest. Which of the following journal entries would be required to recognize accrued interest on December 31, Year 1?
Interest Expense 270 Interest Payable 270
Which of the following shows how disbursing funds from a petty cash fund will affect a company's financial statements?
Journal entries are normally not made at the time of disbursement.
If total assets increase then
Liabilities, common stock, or retained earnings must increase
Unearned Revenue is what type of account?
Liability
Taha Company purchased $8,000 of inventory under terms FOB destination. Freight in amounted to $200. All transactions were paid with cash. Is Taha responsible for the freight cost?
No
Beacon Company accepts a credit card as payment for $2,000 of services provided to a customer. The credit card company charges a 3% handling charge for its collection services. Select the answer that shows how the collection of cash from the credit card company will affect Beacon's financial statements.
OA Accounts Receivable was increased for the expected payment at the time of sale, so when the credit card company pays the balance due, A/R is reduced and Cash is increased. Since both are asset accounts, Total Assets remain unchanged.
Which of the following normally has an associated contra account?
Tangible long-term assets The contra asset Accumulated Depreciation is associated with long-term tangible assets except land and natural resources.
On December 31, Year 1, Kardashian Company recorded an adjusting entry to recognize uncollectible accounts expense. Kardashian had credit sales of $547,000 and estimates uncollectible accounts expense to be one percent of credit sales. Which one of the following journal entries shows how this event would be recorded under the allowance method?
Uncollectible Accounts Expense 5,470 Allowance for Doubtful Accounts 5,470
To determine the true cash balance:
add deposits in transit to and subtract outstanding checks from the unadjusted bank balance.
Which of the following intangible assets has an indefinite useful life?
goodwill
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.
Amarillo Company experienced the following events during its first accounting period. Purchased $5,000 of inventory on account under terms 1/10/n30. Returned $1,000 of the inventory purchased in Event 1. Paid the remaining balance in Accounts Payable within the discount period for the inventory purchased in Event 1. Immediately after the three events have been recognized, the balance in the Inventory account is:
$3,960
At the beginning of Year 2 Clair Company had a $5,500 balance in its Retained Earnings account. During January of Year 2, Clair earned $2,000 of revenue and incurred $1,400 of expenses. Based on this information, the balance in the Retained Earnings account on January 31, Year 2 is
$5,500
Escrow Company's Multistep Income Statement shows Revenue of $102,000, a Gross Margin of $42,000, and Net Income of $12,000. What is the value of Escrow's Cost of Good Sold?
$60,000
Which one of the following journal entries would be required to reinstate a $500 Account Receivable that was previously written-off? (Ignore the recognition of the cash receipt.)
Accounts Receivable 500 Allowance for Doubtful Accounts 500
Smith Company provided services for $3,000 cash. Assume the event is subject to a state sales tax of 9%. Which of the following journal entries would be required to record the sales event?
Cash 3270 Sales Tax Payable 270 Revenue 3000
On November 1, Year 1 Cove Company borrowed $7,000 cash from Shelter Company. Cove issued a one-year note that carried a 7% annual rate of interest. Which of the following journal entries would be necessary to record the issue of the note by Cove on November 1, Year 1?
Cash 7,000 Notes Payable 7,000
Assuming Alpha Company uses the percent of receivables method to determine the amount of Uncollectible Accounts Expense, which of the following shows how the recognition of the expense will affect Alpha's financial statements?
Cash Flow Assets= Liability +Equity Rev -Exp - - +
Senath Company's annual report reveals net credit sales of $240,000 and average accounts receivable of $20,000. The report also shows an average inventory balance of $10,000 and cost of goods of $200,000. Based on this information,the accounts receivable turnover is
Credit Sales 240000 / Avg AR 20000 = 12 time
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, which of the following shows how the adjusting entry to recognize depreciation expense at the end of Year 3 will affect the Company's financial statements?
Assets-A.D.=Liability+Equity Revenue -Expense) 10,000 (10,000) 10,000
Amarillo Company experienced the following events during its first accounting period. Purchased $5,000 of inventory on account. Returned $50 of the inventory purchased in Event 1. Sold the inventory for $6,000 cash. Based on this information, which of the following shows how the recognition of the return will affect the Company's financial statements.
Assets= Liabilities + Equity - -
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
Assets= Liability +Equity Rev - Exp 912 912. 950 38
Mary Company collected cash from an account receivable. The recognition of the cash collection will affect which of the following financial statements?
Balance sheet and the statement of cash flows
An aging schedule is used to improve the estimate used in the percent of revenue method of determining the Uncollectible Accounts Expense. This statement is
False An aging schedule improves the estimate of the percent of RECEIVABLES method because it gives a higher probability of non-payment to accounts that have been outstanding longer, which more accurately reflects reality.
A current asset is an asset that is cash or an asset that will be converted into cash within one year or one operating cycle whichever is shorter.
False A current asset is one that will be converted to cash within the LONGER of one year or one operating cycle.
Product costs are expensed when they are incurred. This statement is
False Product costs are not expensed until later, when the product is sold. The expense account is called Cost of Goods Sold.
Which of the following shows how replenishing a petty cash fund will affect a company's financial statements?
Debit Credit Miscellaneous Expenses XXX Cash XXX
When using an aging schedule to estimate bad debts requires two steps. Step two is:
Deduct the existing Allowance balance from the balance calculated in Step 1.
On January 1, Year 1, Gemstone Mining Company (GMC) paid $10,500,000 cash to purchase a stone pit estimated to hold 50,000 tons of useable material. GMC extracted 10,000 tons of stone in Year 1. The rights to the surface pit were expected to have a $500,000 salvage value at the end of Year 3. Based on this information, the journal entry necessary to recognize Depletion Expense for Year 1 is:
Depletion Expense 2,000,000 Stone Pit 2,000,000
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, which of the following shows the adjusting entry to recognize Depreciation Expense at the end of Year 2?
Depreciation Expense 10,000 Accumulated Depreciation 10,000
South Company purchased North Company. South Company paid $550,000 cash and assumed all of North Company's liabilities. On the date of purchase, North's books showed tangible assets of $500,000, liabilities of $20,000, and equity of $480,000. An appraiser assessed the fair market value of the tangible assets at $530,000 on the acquisition date. Which of the following journal entries would be required to record the purchase of North Company on South Company's books?
Tangible Assets 530,000 Goodwill 40,000 Liabilities 20,000 Cash 550,000
Which of the following statements is false?
Prepaid insurance is shown on the income statement This statement is false because Prepaid Insurance is an asset account that appears on the Balance Sheet. The expense account Insurance Expense would appear on the Income Statement.
The following table shows the amount of revenue generated by three different companies over a three year period of time. Company Year 1 Year 2 Year 3 Brown 30,000 20,000 10,000 Jones 20,000 20,000 20,000 Smith 35,000 15,000 10,000 Based on this information alone Brown Company should depreciate its long-term assets using
double- declining
Each time a payment is made on an installment note, the portion of the next payment associated with interest expense increases. This statement is
false As an installment note is paid back over its life, the portion of the payment applied to interest decreases while the portion applied to principal increases.
the entire cash outflow resulting from a payment on an installment loan is shown as a financing activity on the statement of cash flows. This statement is
false The portion applied towards principal is financing activities and the portion applied to interest is operating activities.
The amount of depletion expense is accumulated in a contra asset account at the end of each accounting period. This statement is
false Unlike other tangible assets, natural resources are physically used up as they are mined; therefore, depletion reduces the asset account directly rather than accumulating in a contra-asset account.
The lender issues a bond certificate to the borrower. This statement is
false the borrower issues a bond certificate to the lender.
The primary difference between a bond payable and a note payable is:
in addition to interest, the repayment of the note is equal to the amount borrowed while the repayment of a bond may be at an amount greater than or less than the amount borrowed
The recovery and collection of an Account Receivable that had previously been written off will
not effect total assets
Hope Company determined that an $8,000 Account Receivable was uncollectible. Which one of the following shows how the write-off of this receivable will affect Hope's financial statements assuming the write-off was not in excess of the Allowance for Doubtful Accounts?
nothing happens
Tangier Company paid cash to purchase a long-term operational asset. The cost of the asset will be expensed (depreciated)
over the useful life of the asset
To account for one year of amortization on a patent, which one of the following accounts would be credited?
patent
Yang Company sold merchandise for $2,000. The event is subject to a state sales tax of 9%. Based on this information, Yang would be required to recognize
sales tax liability of $180.
Zack's Inc. sold land that cost $85,000 for $70,000 cash. As a result of this event:
total assets decreased
A Classified Balance Sheet separates assets and liabilities into categories that distinguish between accounts that are identified as current from those that are identified as long-term. This statement is
true
A company will earn more profit from a cash sale than from a credit card sale.
true
Accrued Interest Expense will appear on the Income Statement but not on the Statement of Cash Flows. This statement is
true
Both Bonds Payable and Notes Payable are obligations that usually arise from borrowing money. This statement is
true
Goodwill is recognized only when it is purchased. This statement is
true
Goodwill is the mix of variables that are unique to a particular company that enables it to produce above average profits. This statement is
true
Land is different from other tangible plant assets in that its utility is not diminished by its use. This statement is
true
The Net Realizable Value of Accounts Receivable represents an estimate of the amount of the Accounts Receivable that a company realistically expects to collect. This statement is
true
The aging method of estimating uncollectible accounts method is based on the assumption that the longer an account receivable remains outstanding, the less likely it is to be collected. This statement is
true
The amount of revenue shown on the Income Statement may differ from the amount of cash inflow from operating activities shown on the Statement of Cash Flows.
true
The balance in the allowance for doubtful accounts provides an estimate of the amount of the accounts receivable that is expected to be uncollectible. This statement is
true
When a borrower makes a payment on an installment loan, a portion of the amount paid reduces the principal balance of the note payable. This statement is
true
Taha Company purchased inventory FOB shipping point and sold that inventory FOB destination. This means Taha must pay freight-in and freight-out. If the freight charges were $100 each and both the purchase and the sale took place during the accounting period, by what amount did the freight charges reduce Revenue in the calculation of Net Income?
$200 Freight-in is added to Inventory then moved to Cost of Goods Sold when the inventory is sold. COGS is an expense on the Income Statement. Freight-out is added to Freight Expense when the transportation out costs are incurred. This too appears on the Income Statement.
On January 1, Year 1, Gemstone Mining Company (GMC) paid $10,500,000 cash to purchase the rights to extract raw stone from a surface pit estimated to hold 50,000 tons of useable material. GMC extracted 10,000 tons of stone in Year 1, 20,000 tons of stone in Year 2, and 25,000 tons of stone in Year 3. The rights to the surface pit were expected to have a $500,000 salvage value at the end of Year 3. What is the depletion expense per ton (unit depletion)?
(Purchase Price 10500000 - Salvage 500000) / Estimated total tons 50000 = $200 per ton
the following items were drawn from the financial statements of Rogers Company: 1.Assets 2.Stockholders Equity 3.Salary Expense 4.Land 5.Rent Revenue 6.Notes Payable 7.Utility Expense 8.Common Stock 9.Sales Revenue 10.Cash 11.Liabilities 12.Dividends 13.Interest Expense 14.Retained Earnings Which of the items listed above were drawn from the Balance Sheet?
1, 2, 4, 6, 8, 10, 11 and 14
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 double-declining-balance method, what is the Depreciation Expense for Year 2?
Asset 48000 - A.D. 24000 = Book Value 24000 Book Value 24000 x double straight-line rate 50% = 12000
Which of the following shows how the adjusting entry to recognize services provided to a client who paid for the services prior to the work being performed?
Asset = Liab. + Equity Rev. - Exp. - + +
Which of the following shows how adjusting the accounts to recognize supplies expense will affect a company's financial statements?
Asset = Liab. + Equity Rev. -Exp. - - +
Which of the following shows how the event "collected cash for services to be rendered in the future" affects a company's financial statements?
Asset = Liab. + Equity Rev. \ +OA +. +
Barron Company accepts a credit card as payment for $1,200 of services provided to a customer. The credit card company charges a 5% handling fee for its collection services. Select the answer that shows how the entry to recognize the event would affect Barron's financial statements.
Assets will increase by $1,140. Expenses will increase by $60. Revenue will increase by $1,200.
Which of the following is normally shown first on the Statement of Cash Flows?
Cash flow from operating activities
Which of the following shows how remitting (paying) sales tax will affect the financial statements of the company making the payment?
Cashflow Assets= Liabilities+ Equity OA - -
Wilson Company earned $2,000 of cash sales. Sales tax is 6%. Which of the following shows how this event would affect the company's financial statements?
Cashflow Assets=Liabilities+Equity Rev -Exp OA 2120 120 2000 2000
Which of the following events experienced by a department store would be presented in the operating section of a multistep Income Statement?
Inventory sold for less than its cost
Escrow Company's multistep Income Statement shows cost of goods sold of $60,000, a gross margin of $42,000, operating income of $12,000 and a $20,000 loss on the sale of land. Based on this information, the net income or (net loss) amounted to:
Operating Income 12000 - Loss 20000 = Net Loss 8000
Paying cash to settle a salaries payable obligation will affect which section of the Statement of Cash Flows?
Operating activities
Barton Company has a line of credit with Sea View Bank. Barton can borrow up to $200,000 at any time over the course of Year 2. The following table shows the interest rate expressed as an annual percentage along with the amounts borrowed and repaid during the first three months of Year 2. Funds are borrowed or repaid on the first day of each month. Interest is payable in cash on the last day of the month. The interest rate is applied to the outstanding monthly balance. Borrowed (Repaid) Interest Rate January $25,000 6% February (5,000) 9% March 20,000 9% How much Interest Expense does Barton incur for January?
Outstanding Balance 25000 x Jan Interest Rate 6% x 1/12 months = 125
Which of the following is a financing activity?
Paying cash dividends
Corazon Company purchased an asset with a list price of $14,000. Corazon paid $500 of transportation in cost, $800 to train an employee to operate the equipment, and $200 to insure the asset against theft after it has been setup in the factory. The asset was purchased under terms 1/20 n/30 and Corazon paid for the asset within the discount period. Based on this information, Corazon would capitalize the asset on its books at
Purchase Price 14000 - 1% Discount 140 + Freight In 500 + Training 800 = Total Cost of asset 15160
Which of the following most accurately depicts the steps in an accounting cycle?
Record transaction data → Adjust accounts → Prepare Statements →Close temporary accounts
If a company provides services in Year 1 but does not collect that cash from the customers until Year 2, in which year will the revenue be recognized?
Year 1 Revenue is recognized when it is earned by providing goods or services to customers. It doesn't matter when the customer pays.
If a company pays cash in Year 1 for insurance coverage during Year 2, when will this Insurance Expense appear on the Income Statement?
Year 2 The insurance will be carried as an asset on the Balance Sheet in Year 1 and it will be expensed in Year 2. Therefore, it will not appear on the Income Statement until Year 2.
Amrico Company sold land that had cost $25,000 for $26,500. Based on this information, the company's year-end financial statements would show:
a cash inflow from investing activities of $26,500 on the Statement of Cash Flows.
The Income Statement presents:
a comparison of the benefits and the sacrifices a company experiences from its operations.
All other things being equal, the profitability is maximized when a company sells inventory with
a high gross margin per unit and a high inventory turnover.
To determine the true cash balance:
add bank collections of depositors' accounts receivable to the unadjusted book balance, add interest earned from bank to the unadjusted book balance. , subtract bank service charges from the unadjusted book balance.
Rex Company's bank statement shows a $200 NSF check. To determine the true cash balance the
amount of the NSF check must be subtracted from the unadjusted book balance.
Inventory is:
an asset account that appears on the Balance Sheet
The Statement of Changes in Stockholders' Equity presents:
an explanation of the changes in the beginning and ending balances of stockholders' equity.
Gains and losses are reported:
as non-operating items on the Income Statement.
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 double-declining-balance method of depreciation what is "doubled"?
straight line rate
The Accounts Payable account appears on:
the Balane Sheet
If a company recognizes accrued salary expense
the employees have completed work but have not been paid
Bessemer Company collected $9,000 cash that was due on an Account Receivable. Bessemer's accountant recorded the entry as a debit to Cash and a credit to Service Revenue. Based on this information alone,
the total of the debit side of the trial balance and the total of the credit side of the trial balance will be equal.