Accounting Final Exam Multiple Choice Practice

If the liabilities of a business increased $75,000 during a period of time and the stockholders' equity in the business decreased $30,000 during the same period, the assets of the business must have: A. Increased $45,000. B. Decreased $45,000. C. Increased $105,000. D. Decreased $105,000. E. Increased $30,000.

A. Increased $45,000.

Which of the following statements is false? A. The declaration of a cash dividend creates a liability as of the date of declaration. B. The date of record is irrelevant with respect to recording a liability for a cash dividend. C. The dividend payment date is when the cash dividend liability is reduced. D. The declaration and issuance of a stock dividend reduces total stockholders' equity.

D. The declaration and issuance of a stock dividend reduces total stockholders' equity.

The journal entry a company records for the issuance of bonds when the contract rate is greater than the market rate would be a. debit Bonds Payable, credit Cash b. debit Cash and Discount on Bonds Payable, credit Bonds Payable c. debit Cash, credit Premium on Bonds Payable and Bonds Payable d. debit Cash, credit Bonds Payable

c. debit Cash, credit Premium on Bonds Payable and Bonds Payable

A check drawn by a company for $340 in payment of a liability was recorded in the journal as $430. What entry is required in the company's accounts? a. debit Accounts Payable; credit Cash b. debit Cash; credit Accounts Receivable c. debit Cash; credit Accounts Payable d. debit Accounts Receivable; credit Cash

c. debit Cash; credit Accounts Payable

The journal entry to close revenues would be: a. debit Income Summary, $155,000; credit Fees Earned, $155,000 b. debit Common Stock, $155,000; credit Fees Earned, $155,000 c. debit Fees Earned, $155,000; credit Income Summary, $155,000 d. credit Fees Earned, $155,000; credit Common Stock, $155,000

c. debit Fees Earned, $155,000; credit Income Summary, $155,000

Changes in current assets and current liabilities are reported on the statement of cash flows, indirect method, in the a. operating activities b. financing activities c. investing activities d. separate schedule of noncash activities

a. operating activities

The primary difference between the periodic and perpetual inventory systems is that a a. periodic system determines the inventory on hand only at the end of the accounting period b. periodic system keeps a record showing the inventory on hand at all times c. periodic system provides an easy means to determine inventory shrinkage d. periodic system records the cost of the sale on the date the sale is made

a. periodic system determines the inventory on hand only at the end of the accounting period

In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment is a. added to net income b. deducted from net income c. ignored because it does not affect cash d. reported supplementally as a noncash investing and financing activity

b. deducted from net income

Ending inventory is made up of the oldest purchases when a company uses a. first-in, first-out b. last-in, first-out c. average cost d. retail method

b. last-in, first-out

For the year ending December 31, Orion, Inc. mistakenly omitted adjusting entries for $1,500 of supplies that were used, (2) unearned revenue of $4,200 that was earned, and (3) insurance of $5,000 that expired. For the year ending December 31, what is the effect of these errors on revenues, expenses, and net income? a. revenues are overstated by $4,200 b. net income is overstated by $2,300 c. expenses are overstated by $6,500 d. expenses are understated by $3,500

b. net income is overstated by $2,300

Inventory at the end of the year was inadvertently overstated. Which of the following statements correctly states the effect of the error on net income, assets, and stockholders' equity? a. net income is overstated, assets are overstated, and stockholders' equity is understated b. net income is overstated, assets are overstated, and stockholders' equity is overstated c. net income is understated, assets are understated, and stockholders' equity is understated d. net income is understated, assets are understated, and stockholders' equity is overstated

b. net income is overstated, assets are overstated, and stockholders' equity is overstated

The supplies account had a balance of $4,400 at the beginning of the year and was debited during the year for $2,400, representing the total of supplies purchased during the year. If $400 of supplies are on hand at the end of the year, the supplies expense to be reported on the income statement for the year is a. $400 b. $ 2,000 c. $6,800 d. $6,400

d. $6,400

On the statement of cash flows, the cash flows from financing activities section would include all of the following except a. receipts from the sale of bonds payable b. payments for dividends c. payments for purchase of treasury stock d. payments of interest on bonds payabled.

d. payments of interest on bonds payabled.

Which of the following is considered to be unearned revenue? a. theater tickets sold last month for yesterday's performance b. theater tickets sold yesterday on credit for yesterday's performance c. theater tickets that were not sold for the current performance d. theater tickets sold for next month's performance

d. theater tickets sold for next month's performance

Prepaid expenses are eventually expected to become a. expenses when their future economic value expires or is used up b. revenues when services are performed c. expenses in the period when they are paid d. revenues when the liability is no longer owed

a. expenses when their future economic value expires or is used up

The inventory data for an item sold by Deacon Inc. for November is as follows: Nov. 1 - inventory = 20 units at $19 Nov. 4 - sold 10 units Nov. 10 - purchased 30 units at $20 Nov. 17 - sold 20 units Nov. 30 - purchased 10 units at $21 Using a perpetual system, what is the cost of goods sold for November if the company uses LIFO? A. $610 B. $600 C. $590 D. $580

C. $590

Net income for the year was $45,500. Accounts receivable increased $5,500, and accounts payable increased by $11,200. Under the indirect method, the cash flow from operations is a. $51,200 b. $45,500 c. $62,200 d. $28,800

a. $51,200

Strods Company reported the following purchases and sales of its only product. Strods uses a periodic inventory system. Determine the cost of goods sold using FIFO. May 1 - Beginning Inventory: 310 units @ $16 May 5 - Purchases 300 units @ $18 May 10 - Sold 220 units @ $26 May 15 - Purchased 180 units @ $19 May 24 - Sold 170 units @ $27 a. $6,400 b. $7,040 c. $7,380 d. $7,190 e. $6,590

a. $6,400

A used machine with a purchase price of $77,000, requiring an overhaul costing $8,000, installation costs of $5,000, and special acquisition fees of $3,000, would have a cost basis of a. $93,000 b. $90,000 c. $82,000 d. $85,000

a. $93,000

There are four closing entries. The first one is to close revenues, the second one is to close expenses, the third one is to close ____, and the last one is to close the ____. a. Income Summary; dividends account b. Income Summary; common stock account c. Income Summary; assets d. dividends account; Income Summary

a. Income Summary; dividends account

Adjustments for accruals are needed to record a revenue that has been earned or an expense that has been incurred but not recorded. a. True b. False

a. True

During periods of increasing costs, the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method. a. True b. False

a. True

In preparing a bank reconciliation, the amount of an error indicating the recording of a check in the journal for an amount larger than the amount of the check is added to the balance per company's records. a. True b. False

a. True

The total interest expense over the entire life of a bond is equal to the sum of the interest payments plus the total discount or minus the total premium related to the bond. a. True b. False

a. True

When the terms of sale are FOB shipping point, the buyer pays the freight charges. a. True b. False

a. True

Which of the following is not a business transaction? a. make a sales offer b. sell goods for cash c. receive cash for services to be rendered later d. pay for supplies

a. make a sales offer

Accounts receivable resulting from sales to customers amounted to $40,000 and $31,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $120,000. Exclusive of the effect of other adjustments, the net cash flows from operating activities to be reported on the statement of cash flows using the indirect method is a. $120,000 b. $129,000 c. $151,000 d. $111,000

b. $129,000

If total liabilities decreased by $46,000 during a period of time and stockholders' equity increased by $60,000 during the same period, the amount and direction (increase or decrease) of the period's change in total assets is a a. $106,000 increase b. $14,000 increase c. $14,000 decrease d. $106,000 decrease

b. $14,000 increase

Norfolk Sporting Goods purchases merchandise with an invoice price of $21,000 and credit terms of 2/10, n/30. Norfolk pays within the discount period. What is the balance in the inventory account for this purchase? a. $21,000 b. $20,580 c. $30,000 d. $29,400

b. $20,580

Cash dividends of $45,000 were declared during the year. Cash dividends payable were $10,000 at the beginning of the year and $15,000 at the end of the year. The amount of cash for the payment of dividends during the year is a. $50,000 b. $40,000 c. $55,000 d. $35,000

b. $40,000

Which of the following statements is not true about a 2-for-1 split? a. Par value per share is reduced to half of what it was before the split. b. Total contributed capital increases. c. The market price will probably decrease. d. A stockholder with ten shares before the split owns twenty shares after the split.

b. Total contributed capital increases.

Which of the following accounts would likely be included in a deferral adjusting entry? a. Interest Revenue b. Unearned Revenue c. Salaries Payable d. Accounts Receivable

b. Unearned Revenue

On the statement of cash flows prepared by the indirect method, the cash flows from operating activities section would include a. receipts from the sale of investments b. amortization of premium on bonds payable c. payments for cash dividends d. receipts from the issuance of capital stock

b. amortization of premium on bonds payable

The adjusting entry to record the amortization of a discount on bonds payable is a. debit Discount on Bonds Payable, credit Interest Expense b. debit Interest Expense, credit Discount on Bonds Payable c. debit Interest Expense, credit Cash d. debit Bonds Payable, credit Interest Expense

b. debit Interest Expense, credit Discount on Bonds Payable

Net income: A. Decreases equity. B. Represents the amount of assets owners put into a business. C. Equals assets minus liabilities. D. Is the excess of revenues over expenses. E. Represents owners' claims against assets.

D. Is the excess of revenues over expenses.

On May 1, Year 1 Marks Consulting received $1,800 from Prince Inc. for a consulting contract effective from May 1, Year 1 to April 30, Year 2. The cash receipt was recorded as Unearned Consulting Revenue and as of December 31, Year 1, $600 of the consulting revenue had been earned. Assuming adjustments are only made at year-end, the adjusting entry on December 31, Year 1 would be: A. A debit to Unearned Consulting Revenue and a credit to Cash for $1,200. B. A debit to Unearned Consulting Revenue and a credit to Consulting Revenue for $600. C. A debit to Consulting Revenue and a credit to Unearned Consulting Revenue for $1,200. D. A debit to Cash and a credit to Consulting Revenue for $600. E. A debit to Consulting Revenue and a credit to Cash for $1,200.

B. A debit to Unearned Consulting Revenue and a credit to Consulting Revenue for $600.

During its first month of operations, Donald Company borrowed $100,000 from a bank, and then purchased equipment costing $40,000 by paying cash of $20,000 and signing a long term note for the remaining amount. During the month, the company also purchased Inventory for $30,000 on credit, performed services for clients for $10,000 on account, paid $15,000 cash for accounts payable, and paid $30,000 cash for utilities. What is the amount of total assets at the end of the month? A) $125,000 B) $115,000 C) $ 95,000 D) $135,000

B) $115,000

Retained earnings at the beginning and ending of the accounting period were $300 and $800, respectively. Revenues of $1,100 and dividends paid to stockholders of $200 were reported during the period. What was the amount of expenses reported for the period? A) $500 B) $400 C) $900 D) $700

B) $400

A company purchased a delivery van for $24,800 with a salvage value of $3,300 on September 1, Year 1. It has an estimated useful life of 5 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, Year 1? A. $1,653. B. $1,433. C. $1,075. D. $4,960. E. $4,300.

B. $1,433.

Deacon Co. provided the following data: sales, $250,000; beginning inventory, $20,000; ending inventory, $22,500; and gross profit, $75,000. What was the amount of inventory purchased during the year? A. $192,500. B. $177,500. C. $72,500. D. $172,500.

B. $177,500.

On January 1, 2021, a company issued $400,900 of 10-year, 12% bonds. The interest is payable semiannually on June 30 and December 31. The issue price was $415,403 based on a 10% market interest rate. The effective-interest method of amortization is used. Rounding all calculations to the nearest whole dollar, what is the interest expense for the six-month period ending June 30, 2021? A. $20,045. B. $20,770. C. $24,054. D. $24,924.

B. $20,770.

A company reported the following asset and liability balances at the end of 2020 and 2021: Assets -- 2020: $152,100 || 2021: $181,400 Liabilities -- 2020: $71,750 || 2021: $80,700 If no transactions affected stockholder's equity except a declared and paid cash dividend of $5,700 and net income in 2021, what is the amount of net income for 2021? A. $20,350. B. $26,050 C. $80,350. D. $106,400.

B. $26,050

At the end of 2021, a $12,000 understatement was discovered in the 2021 ending inventory as reflected in the inventory records. What were the 2021 effects of the $12,000 inventory error (before correction)? A. Assets were understated by $12,000 and net income was overstated by $12,000. B. Assets were understated by $12,000 and net income was understated by $12,000. C. Cost of goods sold was understated by $12,000 and stockholders' equity was understated by $12,000. D. Cost of goods sold was overstated by $12,000 and stockholders' equity was overstated by $12,000.

B. Assets were understated by $12,000 and net income was understated by $12,000.

Atkins Company collected $1,750 as payment for the amount owed by a customer from services provided the prior month on credit. How does this transaction affect the accounting equation for Atkins? A. Assets would decrease $1,750 and liabilities would decrease $1,750. B. One asset would increase $1,750 and a different asset would decrease $1,750, causing no net change in the accounting equation. C. Assets would increase $1,750 and equity would increase $1,750. D. Assets would increase $1,750 and liabilities would increase $1,750. E. Liabilities would decrease $1,750 and equity would increase $1,750.

B. One asset would increase $1,750 and a different asset would decrease $1,750, causing no net change in the accounting equation.

Identify the statement below that is correct. A. When a future expense is paid in advance, the payment is normally recorded in a liability account called Prepaid Expense. B. Promises of future payment by the customer are called accounts receivable. C. Increases and decreases in cash are always recorded in the common stock account. D. An account called Land is commonly used to record increases and decreases in both the land and buildings owned by a business. E. Accrued liabilities include accounts receivable.

B. Promises of future payment by the customer are called accounts receivable.

If a bond is issued at 102, the coupon rate was: A. lower than the market rate of interest. B. higher than the market rate of interest. C. equal to the market rate of interest. D. not related to the market rate of interest.

B. higher than the market rate of interest.

Deacon Inc. reported assets of $50,000, liabilities of $22,000 and common stock of $15,000. Based on this information, what is the amount of the Deacon Inc.'s retained earnings? A) $7,000. B) $57,000. C) $13,000. D) $87,000.

C) $13,000.

The financial statements of Gregg Co. reported wages expense of $160,000 during Year 2, wages payable of $16,000 at the beginning of Year 2, and wages payable of $22,000 at the end of Year 2. What amount of cash was paid for wages during Year 2? A. $176,000 B. $160,000 C. $154,000 D. $144,000

C. $154,000

Deacon Company has provided the following information after year-end adjustments: • Allowance for doubtful accounts was $11,000 at the beginning of the year and $30,000 at the end of the year. • Accounts receivable were $80,000 at the beginning of the year and $420,000 at the end of the year. • Accounts written off as uncollectible totaled $20,000. • Net sales totaled $2,700,000. • Sales discounts were $100,000. What was the amount of Deacon's bad debt expense for the year? A. $19,000. B. $1,000. C. $39,000. D. $20,000.

C. $39,000.

Gammell Company issued $50,700 of 9% bonds with annual interest payments. The bonds mature in ten years. The bonds were issued at $48,350. Gammell Company uses the straight-line method of amortization. What is the amount of the annual interest expense? A. $4,563. B. $4,747. C. $4,798. D. $4,328

C. $4,798.

On January 1, 2020 a company issued and sold a $500,000, 5%, 10-year bond payable, and received proceeds of $496,000. Interest is payable each July 1 and January 1. The company uses the straight-line method to amortize the discount. The carrying value of the bonds immediately after the January 1, 2021 interest payment is: A. $500,000. B. $499,800. C. $496,400. D. $495,800.

C. $496,400.

On January 1, 2021, a company issued $400,000 of 10-year, 12% bonds. The interest is payable semi-annually on June 30 and December 31. The issue price was $413,153 based on a 10% market interest rate. The effective-interest method of amortization is used.Which of the following statements is incorrect? A. The carrying value of the bond will decrease as the bond reaches maturity.A. The market rate of interest on the sale date was less than the coupon rate of interest. B. The carrying value of the bond will decrease as the bond reaches maturity. C. The interest expense will increase as the bond reaches maturity. D. The amortization of the premium on bonds payable will increase as the bond matures.

C. The interest expense will increase as the bond reaches maturity.

Deacon Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the book value of the asset at the end of the first year of its useful life using the double-declining-balance method? A. $600. B. $680. C. $2,320. D. $2,720. E. $300.

D. $2,720

On March 1, Deacon Company purchases inventory for $10,000 with terms 3/10, n/30. It then returns $2,000 of the inventory purchased to the supplier on March 4 and also receives an allowance for defective inventory of $100 on March 5. The company pays the amount due on March 9. What is the amount of the discount that will be taken on March 9? A. $300 B. $297 C. $240 D. $237 E. None.

D. $237

On May 31 of the current year, the assets and liabilities of Riser, Incorporated are as follows: Cash $21,500; Accounts Receivable, $7,400; Supplies, $750; Equipment, $12,150; Accounts Payable, $9,500. What is the amount of equity as of May 31 of the current year? B. $51,300. B. $13,150. C. $21,500. D. $32,300. E. $41,800

D. $32,300.

Deacon Inc. provided consulting services to a customer for $5,500 cash. Based on this information, which of the following statements istrue? A) Total assets increased and total equity decreased. B) Total assets were unchanged. C) Liabilities decreased and net income increased. D) Total assets increased and net income increased.

D) Total assets increased and net income increased.

Deacon Company has provided the following information: • Sales, $1,800,000 • Selling and administrative expenses, $330,000 • Sales returns and allowances, $90,000 • Gross profit, $1,360,000 • Bad debt expense, $33,000 • Sales discounts, $43,000 • Net income, $1,030,000 How much are Deacon's net sales? A. $1,634,000. B. $1,800,000. C. $1,745,000. D. $1,667,000.

D. $1,667,000.

How would the issuance of a $120,000 mortgage note payable in exchange for a building be reported on the statement of cash flows? A. Financing activity B. Investing activity C. Financing activity D. Noncash financing and investing activity E. Investing and Financing Activities

D. Noncash financing and investing activity

Paul's Landscaping paid $630 on account for supplies purchased in the prior month. Which of the following general journal entries will Paul's Landscaping make to record this transaction? A. Debit Office supplies expense, $630; credit Cash, $630. B. Debit Cash, $630; credit Office supplies, $630. C. Debit Office supplies, $630; credit Accounts payable, $630. D. Debit Office supplies, $630; credit Cash, $630. E. Debit Accounts payable, $630; credit Cash, $630.

E. Debit Accounts payable, $630; credit Cash, $630.

Deacon Corp. uses the perpetual inventory system and purchased $100,000 of merchandise on May 7, subject to the terms, 1/10, n/30. On May 12, it pays for all the merchandise purchased on May 7. The entry on June 12 will reduce: A. Accounts Payable by $99,000. B. Net Income by $1,000. C. Net Income by $99,000. D. Cash by $100,000. E. Merchandise Inventory by $1,000.

E. Merchandise Inventory by $1,000.

Which of the following is the best description of accounting's role in business? a. Accounting provides stockholders with information regarding the market value of the company's stocks. b. Accounting provides information to managers to operate the business and to other users to make decisions regarding the economic condition of the company. c. Accounting helps in decreasing the credit risk of the company. d. Accounting is not responsible for providing any form of information to users. That is the role of the Information Systems Department.

b. Accounting provides information to managers to operate the business and to other users to make decisions regarding the economic condition of the company.

Which of the following accounts would be increased with a credit? a. Land; Accounts Payable; Dividends b. Accounts Payable; Unearned Revenue; Common Stock c. Dividends; Accounts Receivable; Unearned Revenue d. Cash; Accounts Receivable; Common Stock

b. Accounts Payable; Unearned Revenue; Common Stock

Adjusting entries affect only expense and asset accounts. a. True b. False

b. False

On the statement of cash flows, the cash flows from operating activities section would include a. receipts from the issuance of capital stock b. payment for interest on short-term notes payable c. payments for the purchase of investments d. payments for cash dividends

b. payment for interest on short-term notes payable

Which of the following items should not be included in the cost of ending inventory? a. purchased units in transit, shipped FOB shipping point b. purchased units in transit, shipped FOB destination c. units on hand in the warehouse d. sold units in transit, not invoiced, and shipped FOB destination

b. purchased units in transit, shipped FOB destination

Which of the following is an example of accrued revenue? a. snow removal services that have been paid for three months in advance b. snow removal services that have been provided but have not been billed or paid c. an agreement that has been signed for snow removal services for the next three months d. snow removal services that have been provided and paid on the same day

b. snow removal services that have been provided but have not been billed or paid

An asset was purchased for $120,000 on January 1, Year 1 and originally estimated to have a useful life of 10 years with a residual value of $10,000. At the beginning of the third year, it was determined that the remaining useful life of the asset was only 4 years with a residual value of $2,000. Calculate the third-year depreciation expense using the revised amounts and straight-line method. a. $25,000 b. $11,000 c. $24,000 d. $24,500

c. $24,000

On July 8, Jones Inc. issued an $80,000, 6%, 120-day note payable to Miller Company. Assume that the fiscal year of Jones ends July 31. Using a 360-day year, what is the amount of interest expense recognized by Jones in the current fiscal year? When required, round your answer to the nearest dollar. a. $700 b. $4,200 c. $307 d. $1,400

c. $307

Which one of the accounts below would likely be included in an accrual adjusting entry? a. Insurance Expense b. Prepaid Rent c. Interest Expense d. Unearned Rent

c. Interest Expense

During the taking of its physical inventory on December 31, 2014, Barry's Bike Shop incorrectly counted its inventory as $350,000 instead of the correct amount of $280,000. The effect on the balance sheet and income statement would be a. assets overstated by $70,000; retained earnings understated by $70,000; and net income statement understated by $70,000 b. assets overstated by $70,000; retained earnings understated by $70,000; and no effect on the income statement c. assets, retained earnings, and net income all overstated by $70,000 d. assets and retained earnings overstated by $70,000; and net income understated by $70,000

c. assets, retained earnings, and net income all overstated by $70,000

Multiple-step income statements show a. gross profit but not income from operations b. neither gross profit nor income from operations c. both gross profit and income from operations d. income from operations but not gross profit

c. both gross profit and income from operations

Which intangible assets are amortized over their useful life? a. trademarks b. goodwill c. patents d. all of these

c. patents

Machinery was purchased on January 1 for $51,000. The machinery has an estimated life of 7 years and an estimated salvage value of $9,000. Double-declining-balance depreciation for the second year would be (round calculations to the nearest dollar): a. $10,929 b. $6,000 c. $10,500 d. $10,408

d. $10,408

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000 shares were originally issued and 10,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $2 per share dividend is declared? a. $60,000 b. $20,000 c. $120,000 d. $100,000

d. $100,000

Minor Company had checks outstanding totaling $19,200 on its April bank reconciliation. In May, Minor Company issued checks totaling $64,900. The May bank statement shows that $47,600 in checks cleared the bank in May. A check from one of Minor Company's customers of $300 was also returned marked "NSF." The amount of outstanding checks on Minor Company's May bank reconciliation should be a. $28,400 b. $36,800 c. $17,300 d. $36,500

d. $36,500

Eastview Company uses a perpetual LIFO inventory system, and has the following purchases and sales: January 1 - 150 units were purchased at $9 per unit. January 17 - 120 units were sold. January 20 -160 units were purchased at $11 per unit. January 29 - 150 units were sold. What is Eastview's ending inventory balance at January 31? a. $2,730. b. $2,750. c. $2,670. d. $380. e. $440.

d. $380.

The net income reported on the income statement is $58,000. However, adjusting entries have not been made at the end of the period for supplies expense of $2,200 and accrued salaries of $1,300. Net income, as corrected, is a. $56,700 b. $58,000 c. $55,800 d. $54,500

d. $54,500

Where are selling and administrative expenses found on the multiple-step income statement? a. before gross profit b. after sales and before gross profit c. after net income and before expenses d. after gross profit

d. after gross profit

In the normal operation of business, you receive a check from a customer and deposit it into your checking account. With your bank statement you are advised that this check for $775 is "NSF." The bank also informs you that due to the amount of activity on your business account the monthly service charge is $75. During a bank reconciliation, you will a. subtract both values from balance according to bank b. add both values to balance according to books c. add both values to balance according to bank d. subtract both values from balance according to books

d. subtract both values from balance according to books

Annie's Catering received $1,120 cash from a customer for catering services to be provided next month. Given the choices below, determine the general journal entry that Annie's Catering will make to record the cash receipt. Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts. A) Dr. Cash $1,120, Cr. Unearned Catering Revenue $1,120 B) Dr. Cash $1,120, Cr. Catering Revenue $1,120 C) Dr. Accounts Receivable $1,120, Cr. Catering Revenue $1,120 D) Dr. Unearned Catering Revenue $1,120 Cr. Catering Revenue $1,120 E) Dr. Cash $1,120, Cr. Accounts. Receivable $1,120

A) Dr. Cash $1,120, Cr. Unearned Catering Revenue $1,120

A company has the following per unit original costs and market values for its inventory. Lower of cost or market is applied to individual items. Part A: 50 units with a cost of $5, and market value of $4.50 Part B: 75 units with a cost of $6, and market value of $6.50 Part C: 160 units with a cost of $3, and market value of $2.50 Under the lower of cost or market method, the total value of this company's ending inventory reported on the balance sheet should be: A. $1,075.00. B. $1,180.00. C. $1,112.50. D. $1,217.50. E. $1,137.50.

A. $1,075.00.

Deacon Inc. experienced the following transactions during Year 1, its first year in operation. Issued common stock for $12,000 cash. Provided $4,600 of services on account. Paid $3,200 cash for operating expenses. Collected $3,800 of cash from customers in partial settlement of its accounts receivable. Paid a $200 cash dividend to stockholders. What is the amount of net income that will be reported on Deacon Inc.'s Year 1 income statement? A. $1,400 B. $800 C. $1,000 D. $1,200

A. $1,400

Assume Deacon Industries reported the following adjusted account balances at year-end: Dec 31, 2021 | Dec 31, 2020 A/R $1,690,200 | 1,340,920 ADA (92,000) | (76,300) A/R, Net $1,598,200 | $1,264,620 Assume the company recorded no write-offs or recoveries during 2021. What was the amount of Bad Debt Expense reported in 2021? A. $15,700. B. $31,400. C. $76,300. D. $92,000.

A. $15,700.

On April 1, Otisco, Inc. paid Garcia Publishing Company $3,240 for 36-month subscriptions to several different magazines. Otisco debited the prepayment to a Prepaid Subscriptions account, and the subscriptions started immediately. What amount should appear in the Prepaid Subscription account for Otisco, Inc. after adjustments on December 31 of the first year assuming the company is using a calendar-year reporting period and no previous adjusting entries had been made? A. $2,430. B. $3,240. C. $810. D. $1,080. E. $0.

A. $2,430.

A corporation issued 5,000 shares of its $4 par value common stock in exchange for land that has a market value of $100,000. The entry to record this transaction would include: A. A credit to Common Stock for $20,000. B. A debit to Land for $20,000. C. A credit to Land for $20,000. D. A credit to Paid-in Capital in Excess of Par Value, Common Stock for $100,000. e. A credit to Common Stock for $100,000.

A. A credit to Common Stock for $20,000.

Deacon Inc. uses the perodic inventory system and sold merchandise was on credit for $30,000, terms 3/15, n/30. Which of the following journal entry descriptions correctly describes the cash collection? A. Cash is debited for $29,100, sales discounts is debited for $900, and accounts receivable is credited for $30,000 if the collection is within the discount period. B. Cash is debited for $30,000, accounts receivable is credited for $29,100, and sales discounts is credited for $900 if the collection is within the discount period. C. Cash is debited for $25,500 and accounts receivable is credited for $25,500 if the collection is within the discount period. D. Cash is debited for $29,100 and accounts receivable is credited for $29,100 if the collection is after the discount period.

A. Cash is debited for $29,100, sales discounts is debited for $900, and accounts receivable is credited for $30,000 if the collection is within the discount period.

Edison Consulting received a $370 utilities bill and immediately paid it. Edison's general journal entry to record this transaction will include a: A. Debit to Utilities Expense for $370. B. Credit to Accounts Payable for $370. C. Debit to Cash for $370. D. Credit to Utilities Expense for $370. E. Debit to Accounts Payable for $370.

A. Debit to Utilities Expense for $370.

When using the indirect method to prepare the operating activities section of the statement of cash flows, how is a decrease in accounts payable handled? A. It is subtracted from net income in the cash flows from operating activities section. B. It is subtracted from current assets in the cash flows from financing activities section. C. It is added to net income in the cash flows from operating activities section. D. It is added to inventory purchases in the cash flows from investing activities section.

A. It is subtracted from net income in the cash flows from operating activities section.

What is the effect on the financial statements when a company fails to accrue salaries expense at year-end? A. Net income is overstated and liabilities are understated. B. Expenses are understated and stockholders' equity is understated. C. Expenses and liabilities are both overstated. D. Net income is overstated and liabilities are properly reported.

A. Net income is overstated and liabilities are understated.

Deacon Company declared and distributed a 5% stock dividend on 24,000 shares of issued and outstanding $5 par value common stock. The market price per share was $13 on the declaration date. Which of the following correctly describes the effect of accounting for the declaration and distribution of the stock dividend? A. Retained earnings decreased $15,600. B. Retained earnings decreased $16,800. C. Common stock increased $15,600. D. Additional paid-in capital increased $10,800.

A. Retained earnings decreased $15,600.

Failure to record amortization expense on a patent during the current year will result in which of the following? A. Stockholders' equity and total assets will both be overstated. B. Net income will be overstated, but there would be no effect on total assets. C. Assets will be overstated, but there would be no effect on net income for the year. D. Stockholders' equity and total assets will both be understated.

A. Stockholders' equity and total assets will both be overstated.

Garner, Inc. uses the allowance method. At December 31, 2021, the company's balance sheet reports Accounts Receivable, Net in the amount of $27,200. On January 2, 2022, Garner writes off a $2,400 customer account balance when it becomes clear that the customer will never pay. What is the amount of Accounts Receivable, Net immediately afterthe write-off? A. $2,400. B. $27,200. C. $24,800 D. $29,600

B. $27,200.

Deacon Company reported a December 31 ending inventory balance of $412,000. The following additional information is also available: - Deacon sold goods costing $22,000 to Champion Inc. on December 29. The goods were shipped FOB shipping point and were received by Champion Inc. on January 2 of the following year. The shipment was a rush order that was supposed to arrive by December 31. These goods were included in Deacon's ending inventory balance of $412,000. - The ending inventory balance of $412,000 included $72,000 of inventory consigned to Tarheel Inc. for them to sell on Deacon's behalf. Based on this information, the correct balance for ending inventory on December 31 is: A. $412,000 B. $390,000 C. $318,000 D. $362,000 E. $340,000

B. $390,000

On August 1, Year 1, Deacon Company issued a one-year $80,000 face value interest-bearing note with a stated interest rate of 9% to Tarheel Bank. Deacon accrues interest expense on December 31, Year 1, its calendar year-end. What is the cash flow from financing activities that will be reported during the year ending December 31, Year 1? A. $0 B. $80,000 inflow C. $83,000 inflow D. ($87,200) outflow

B. $80,000 inflow

Deacon Company plans to depreciate a new building using the double declining-balance depreciation method. The building cost is $990,000. The estimated salvage value of the building is $69,000 and it has an expected useful life of 20 years. Assuming the first year's depreciation expense was recorded properly, what would be the amount of depreciation expense for the second year? A. $99,000. B. $89,100. C. $49,500. D. $60,490.

B. $89,100.

A machine originally had an estimated useful life of 9 years, but after 2 complete years, it was decided that the original estimate of useful life should have been 12 years. At that point the remaining cost to be depreciated should be allocated over the remaining: A. 5 years . B. 10 years. C. 9 years. D. 12 years. E. 7 years.

B. 10 years.

An adjusting entry could be made for each of the following except: A. Depreciation. B. Cash. C. Prepaid Insurance. D. Unearned revenue. E. Accrued wages.

B. Cash.

The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense. A/R $442,000 Debit ADA 1,320 Debit Net Sales 2,170,000 Credit All sales are made on credit. Based on past experience, the company estimates 2.0% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense? A. Debit Bad Debts Expense $8,840; credit Allowance for Doubtful Accounts $8,840. B. Debit Bad Debts Expense $43,400; credit Allowance for Doubtful Accounts $43,400. C. Debit Bad Debts Expense $42,080; credit Allowance for Doubtful Accounts $42,080. D. Debit Bad Debts Expense $10,160; credit Allowance for Doubtful Accounts $10,160. E. Debit Bad Debts Expense $44,720; credit Allowance for Doubtful Accounts $44,720.

B. Debit Bad Debts Expense $43,400; credit Allowance for Doubtful Accounts $43,400.

On January 1, a company issues bonds dated January 1 with a par value of $370,000. The bonds mature in 5 years. The contract rate is 11%, and interest is paid semiannually on June 30 and December 31. The market rate is 10% and the bonds are sold for $384,280. The journal entry to record the first interest payment using straight-line amortization is: (Rounded to the nearest dollar.) A. Debit Bond Interest Expense $18,922; debit Discount on Bonds Payable $1,428; credit Cash $20,350. B. Debit Bond Interest Expense $18,922; debit Premium on Bonds Payable $1,428; credit Cash $20,350. C. Debit Interest Payable $20,350; credit Cash $20,350. D. Debit Bond Interest Expense $21,778; credit Premium on Bonds Payable $1,428; credit Cash $20,350. E. Debit Bond Interest Expense $21,778; credit Discount on Bonds Payable $1,428; credit Cash $20,350.

B. Debit Bond Interest Expense $18,922; debit Premium on Bonds Payable $1,428; credit Cash $20,350.

On September 1, Martin Inc. makes a $26,000, 90-day, 7.5% cash loan to Stine Company. Martin's entry to record the collection of the note and interest at maturity should be: (Use a 360-day year.) A. Debit Cash $26,487.50; credit Notes Receivable for $26,487.50. B. Debit Cash $26,487.50; credit Interest Revenue $487.50; credit Notes Receivable $26,000. C. Debit Cash $27,950; credit Interest Revenue $1,950, credit Notes Receivable $26,000. D. Debit Notes Payable $26,000; Debit Interest Expense $1,950; credit Cash $27,950. E. Debit Cash for $26,000; credit Notes Receivable $26,000.

B. Debit Cash $26,487.50; credit Interest Revenue $487.50; credit Notes Receivable $26,000.

Under the indirect method, which of the following items would be added to net income to determine the cash flow from operating activities? A. Gain on the sale of equipment B. Depreciation expense C. Increase in interest receivable D. Decrease in accounts payable

B. Depreciation expense

During Deacon Inc.'s first year of operations, the company purchased $3,800 of supplies and recorded the purchase in the Supplies account. At year-end, a physical count of the supplies on hand revealed that $1,075 of unused supplies were available for future use. How will the related adjusting entry affect the company's financial statements? A. Expenses will increase and assets will decrease by $1,075. B. Expenses will increase and assets will decrease by $2,725. C. Assets and expenses will both increase by $1,075. D. Assets and expenses will both increase by $2,725. E. The related adjusting entry has no effect on net income or the accounting equation.

B. Expenses will increase and assets will decrease by $2,725.

A company has 8 million common shares authorized and 1 million shares issued. The par value is $3 per share and the market price is $25 when the company declares a 3-for-1 stock split. Which of the following is correct? A. There will be a transfer of $3 million from retained earnings to the common stock account. B. For every one share of stock owned, a shareholder will receive an additional 2 shares of stock. C. The shares issued and outstanding will all triple while the par value will remain the same. D. The company will be unable to declare a 3-for-1 split because it does not have enough authorized shares to issue the split.

B. For every one share of stock owned, a shareholder will receive an additional 2 shares of stock.

Which of the following would be included in Deacon Company's sales in 2021? A. Goods shipped from a supplier in 2021 with terms of FOB shipping point. Deacon received the goods in 2021. B. Goods shipped to customers in 2020 with terms of FOB destination. The customer received the goods in 2021. C. Goods shipped to customers in 2021 with terms of FOB destination. The customer received the goods in 2022. D. Goods shipped to customers in 2020 with terms of FOB shipping point. The customer received the goods in 2021.

B. Goods shipped to customers in 2020 with terms of FOB destination. The customer received the goods in 2021.

The adjusting entry to record an accrued revenue is: A. Increase an expense; increase a liability. B. Increase an asset; increase revenue. C. Decrease a liability; increase revenue. D. Increase an expense; decrease an asset. E. Increase an expense; decrease a liability.

B. Increase an asset; increase revenue.

Which of the following statements is correct with respect to a loss on the sale of a depreciable asset? A. Net income decreases and total assets increase. B. Net income decreases and total assets decrease. C. Total assets decrease and stockholders' equity remains unchanged. D. Total assets increase and stockholders' equity decreases.

B. Net income decreases and total assets decrease.

A company repurchased shares of its common stock for $17,500. The stock was initially issued for $13,200 and had a $4,600 par value. Which of the following statements correctly describes the effects of the repurchase of company's common stock shares? A. Common stock decreases by $13,200. B. Stockholders' equity decreases by $17,500. C. Net income decreases by $8,600. D. Net income increases by $8,600.

B. Stockholders' equity decreases by $17,500.

Which of the following transactions affects both retained earnings and net income? A. The payment of a cash dividend. B. The recording of revenue for services provided. C. The issuance of stock in exchange for cash. D. The borrowing of money from a bank.

B. The recording of revenue for services provided.

Which of the following statements is false regarding the Allowance for Doubtful Accounts? A. It is a contra asset account. B. It is used instead of reducing accounts receivable directly. C. It is credited when uncollectible accounts are written off. D. It is credited when bad debts expense is estimated and recorded. E. It is credited when there are recoveries of previously written off uncollectible accounts.

C. It is credited when uncollectible accounts are written off.

Deacon Company has provided the following information prior to any year-end bad debt expense adjustment: Cash sales, $169,000 Credit sales, $469,000 Selling and administrative expenses, $129,000 Sales returns and allowances, $49,000 Gross profit, $509,000 Accounts receivable, $295,000 Sales discounts, $33,000 Allowance for doubtful accounts credit balance, $3,100 Deacon Company prepares an aging of accounts receivable and the result shows that 3% of accounts receivable is estimated to be uncollectible. What is the balance in the allowance for doubtful accounts after bad debt expense is recorded? A. $5,657. B. $5,750. C. $8,850. D. $11,950.

C. $8,850.

Savvy Sightseeing had beginning equity of $73,000; revenues of $93,000, expenses of $66,000, and dividends to stockholders of $9,100. There were no stockholder investments during the year. Calculate ending equity. A. $46,000. B. $27,000. C. $90,900. D. $100,000. E. $36,900.

C. $90,900.

Which of the following items would be classified as a cash flow from investing activities? 1) Issue common stock for cash 2) Payment on principal of note payable 3) Payment of dividends 4) Sale of equipment for cash A. 1 and 4 B. 3 only C. 4 only D. 1, 2, 3, and 4

C. 4 only

The following data has been collected about Deacon Company's stockholders' equity accounts: Common stock $10 par value; 16,000 shares authorized, 8,000 shares issued, 2,400 shares outstanding: $80,000 Paid-in capital in excess of par value, common stock: $46,000 Retained earnings: $21,000 Treasury stock: $26,640 Assuming the treasury shares were all purchased at the same price, the number of shares of treasury stock is: A. 21,600. B. 13,600. C. 5,600. D. 2,664.

C. 5,600.

A machine, acquired for a cash cost of $22,400, is being depreciated on a straight-line basis of $2,800 per year. The residual value was estimated to be 25% of cost. The estimated useful life is: A. 4 years B. 5 years C. 6 years D. 7 years

C. 6 years

A debit is used to record which of the following: A. A decrease in an asset account. B. A decrease in an expense account. C. A decrease in a liability account. D. An increase in the common stock account. E. An increase in a revenue account.

C. A decrease in a liability account.

If a company paid $38,000 of its accounts payable in cash, what was the effect on the accounting equation? A. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would decrease $38,000. B. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would increase $38,000. C. Assets would decrease $38,000, liabilities would decrease $38,000, and equity remains unchanged. D. There would be no effect on the accounts because the accounts are affected by the same amount. E. Assets would increase $38,000 and liabilities would decrease $38,000.

C. Assets would decrease $38,000, liabilities would decrease $38,000, and equity remains unchanged.

Cash was received by Deacon Inc. from a customer for services billed to the customer in the prior month. Which of the following entries would Deacon Inc. make to record this transaction (e.g., the cash receipt)? A. Debit Cash; Credit Service Revenue B. Debit Cash; Credit Accounts Payable C. Debit Cash; Credit Accounts Receivable D. Debit Accounts Receivable; Credit Accounts Payable E. Debit Accounts Receivable; Credit Service Revenue

C. Debit Cash; Credit Accounts Receivable

Deacon Company declared a $0.50 per share cash dividend. The company has 190,000 shares issued, and 10,000 shares in treasury stock. The journal entry to record the dividend declaration is: A. Debit Retained Earnings $5,000; credit Common Dividends Payable $5,000. B. Debit Common Dividends Payable $95,000; credit Cash $95,000. C. Debit Retained Earnings $90,000; credit Common Dividends Payable $90,000. D. Debit Common Dividends Payable $90,000; credit Cash $90,000. E. Debit Retained Earnings $95,000; credit Common Dividends Payable $95,000.

C. Debit Retained Earnings $90,000; credit Common Dividends Payable $90,000.

The accounting equation for Long Company shows an increase in its assets and an increase in its liabilities. Which of the following transactions could have caused that effect? A. Cash was received from providing services to a customer. B. Cash was received as a stockholder investment. C. Equipment was purchased on credit. D. Supplies were purchased for cash. E. Advertising expense for the month was paid in cash.

C. Equipment was purchased on credit.

Which of the following statements does not correctly describe the accounting for bonds that were issued at their face (maturity) value? A. The market rate of interest equals the coupon rate. B. The interest expense over the life of the bonds will equal the total cash interest payments. C. The carrying value of the bond liability decreases when interest payments are made on the due dates. D. There is no premium or discount recorded when the bonds are issued.

C. The carrying value of the bond liability decreases when interest payments are made on the due dates.

A company purchases a delivery van by paying $5,000 cash and by signing a $25,000 note payable. Which of the following correctly describes the recording of the delivery van purchase? A. The delivery van account is debited for $25,000. B. Notes payable is debited for $25,000. C. The delivery van account is debited for $30,000. D. Cash is debited for $5,000. E. Delivery expense is debited for $5,000.

C. The delivery van account is debited for $30,000.

Using the aging approach, management estimates that 10% of the $54,000 of Accounts Receivable will be uncollectible. The Allowance for Doubtful Accounts has a $800 unadjusted debit balance. The adjusting entry to record estimated bad debts includes a: A. debit to Bad Debt Expense of $5,400. B. debit to Bad Debt Expense of $4,600. C. credit to Allowance for Doubtful Accounts of $6,200. D. credit to Allowance for Doubtful Accounts of $800.

C. credit to Allowance for Doubtful Accounts of $6,200.

On March 1, Deacon Company purchased new assembly line machinery for $53,500 by paying cash. Other costs associated with the equipment were: testing costs, $1,700; installation costs $3,700; and freight costs $3,200. At what amount will the equipment be recorded on a balance sheet? A. $58,900. B. $55,200. C. $53,500. D. $62,100.

D. $62,100.

Deacon Corporation issued 18,000 shares of common stock for $62 per share. The bylaws established a par value of $10 per share. What is the amount of increase in the Paid-in Capital in Excess of Par - Common Stock account as a result of this transaction? A. $1,116,000. B. $0. C. $180,000. D. $936,000.

D. $936,000.

Deacon Company purchased a computer that cost $10,300. It had an estimated useful life of five years and a salvage value of $1,150. The computer was depreciated by the straight-line method and was sold at the end of the third year of use for $5,120 cash. How much of a gain or loss should Amanda record? A. A loss of $310. B. A gain of $1,150. C. A loss of $5,120. D. A gain of $310.

D. A gain of $310.

Deacon Goods has noticed the following items that need to be considered for its income statement for the year ended December 31, 2021: Deacon's store rent of $2,000 for January 2022 was paid on December 28, 2021. Salaries of $3,000 for employees who worked the last week in December 2021 will be paid January 3, 2022. The electricity bill of $400 for December 2021 was received on the last day of December and will be paid January 20, 2022. On November 1, 2021, Deacon paid $1,500 for advertising in a monthly magazine that will be distributed in November 2021, December 2021, and January 2022. What is the proper amount of expenses to be included in the income statement for 2021? A. $5,900. B. $6,400. C. $6,900. D. $4,400. E. $4,000.

D. $4,400.

Adonis Corporation issued 10-year, 9% bonds with a par value of $120,000. Interest is paid semiannually. The market rate on the issue date was 8%. Adonis received $128,156 in cash proceeds. Which of the following statements is true? A. Adonis must pay $128,156 at maturity and no interest payments. B. Adonis must pay $128,156 at maturity plus 20 interest payments of $5,400 each. C. Adonis must pay $120,000 at maturity and no interest payments. D. Adonis must pay $120,000 at maturity plus 20 interest payments of $5,400 each. E. Adonis must pay $120,000 at maturity plus 20 interest payments of $4,800 each.

D. Adonis must pay $120,000 at maturity plus 20 interest payments of $5,400 each.

Deacon Company made an ordinary repair to a delivery truck in October of 2021 at a cost of $500 and capitalized the repair cost. What is the effect on the 2021 financial statements as a result of the incorrect capitalization? A. Assets are overstated and stockholders' equity is understated. B. Assets are understated and net income is overstated. C. Assets and stockholders' equity are both understated. D. Assets and net income are both overstated.

D. Assets and net income are both overstated.

If merchandise costing $500 is sold on account for $620, how is this transaction recorded when using a perpetual inventory system? A. Debit Accounts Receivable and credit Sales Revenue for $620; debit Inventory and credit Cost of Goods Sold for $500. B. Debit Accounts Receivable and credit Sales Revenue for $620; no Cost of Goods Sold entry. C. Debit Cash and credit Sales Revenue for $620; debit Cost of Goods Sold and credit Inventory for $500. D. Debit Accounts Receivable and credit Sales Revenue for $620; debit Cost of Goods Sold and credit Inventory for $500.

D. Debit Accounts Receivable and credit Sales Revenue for $620; debit Cost of Goods Sold and credit Inventory for $500.

On January 1, Parson Freight Company issues 8%, 10-year bonds with a par value of $3,200,000. The bonds pay interest semiannually. The market rate of interest is 9% and the bond selling price was $2,991,873. The bond issuance should be recorded as: A. Debit Cash $2,991,873; credit Bonds Payable $2,991,873. B. Debit Cash $3,200,000; credit Bonds Payable $3,200,000. C. Debit Cash $3,200,000; credit Bonds Payable $2,991,873; credit Discount on Bonds Payable $208,127. D. Debit Cash $2,991,873; debit Discount on Bonds Payable $208,127; credit Bonds Payable $3,200,000. E. Debit Cash $2,991,873; debit Interest Expense $208,127; credit Bonds Payable $3,200,000.

D. Debit Cash $2,991,873; debit Discount on Bonds Payable $208,127; credit Bonds Payable $3,200,000.

On December 1, Year 1, Deacon Trash Removal Company received $12,000 of cash in advance from a customer and promised to provide services for that customer during the months of December, January, February and March. This advance payment was recorded in the Unearned Revenue account. How will the December 31, Year 1 year-end adjustment to recognize the partial expiration of the contract impact the basic accounting equation? A. Total assets will increase by $3,000. B. Equity will decrease by $3,000. C. Total liabilities will increase by $3,000. D. Equity will increase by $3,000 E. Total assets will increase by $3,000 and equity will increase by $3,000

D. Equity will increase by $3,000

Closing the temporary accounts at the end of each accounting period does all of the following except: A. Serves to transfer the effects of these accounts to the retained earnings account on the balance sheet. B. Prepares the dividends account for use in the next period. C. Brings the revenue and expense accounts to zero balances. D. Has no effect on the retained earnings account. E. Causes retained earnings to reflect increases from revenues and decreases from expenses and dividends.

D. Has no effect on the retained earnings account.

Which of the following statements is correct regarding either the perpetual or periodic inventory systems? A. In a perpetual inventory system, the amount of inventory is not known until the end of the period when the inventory count is taken. B. In a periodic inventory system, cost of goods sold is recorded at the time of each sale during the accounting period. C. In a periodic inventory system, cost of goods sold is developed ONLY from a comparison of beginning inventory and ending inventory. D. In a perpetual inventory system, the inventory account is increased for each purchase during the accounting period.

D. In a perpetual inventory system, the inventory account is increased for each purchase during the accounting period.

Deacon Corporation's balance sheet reports equipment that originally cost $65,000. The accumulated depreciation for the equipment is $25,000. Warren sells the equipment for $37,000. What would the effect be on its Income Statement (Gain/Loss) and Statement of Cash Flows (+/- in Cash Flow Operating, Investing or Financing)? A. Income Statement Gain of $37,000; Cash Flow Investing Activities + $37,000 B. Income Statement Gain of $3,000; Cash Flow Operating Activities − $3,000 C. Income Statement Loss of $3,000; Cash Flow Operating Activities − $3,000 D. Income Statement Loss of $3,000; Cash Flow Investing Activities + $37,000

D. Income Statement Loss of $3,000; Cash Flow Investing Activities + $37,000

Which of the following statements is correct when inventory unit costs are increasing? A. LIFO will result in lower net income and a higher inventory valuation than will FIFO. B. LIFO will result in higher net income and a higher inventory valuation than will FIFO. C. FIFO will result in higher net income and a lower inventory valuation than will LIFO. D. LIFO will result in lower net income and a lower inventory valuation than will FIFO.

D. LIFO will result in lower net income and a lower inventory valuation than will FIFO.

A $40,000 understatement of the 2021 ending inventory was discovered after the financial statements for 2021 were prepared. Which of the following describes the effect of the inventory error on the 2022 financial statements? A. Net income and stockholders' equity are both understated. B. Net income and stockholders' equity are both overstated. C. Net income is understated and stockholders' equity is correct. D. Net income is overstated and stockholders' equity is correct. E. Net income and stockholders' equity are both unaffected.

D. Net income is overstated and stockholders' equity is correct.

How does the payment of a previously declared cash dividend affect the elements of the financial statements? A. Decreases assets and stockholders' equity B. Decreases liabilities and increases stockholders' equity C. Increases liabilities and decreases stockholders' equity D. None of these answer choices are correct.

D. None of these answer choices are correct.

Which of the following statements is true when using the allowance method to account for uncollectible accounts? A. The journal entry to record bad debt expense has no effect on total assets. B. The journal entry to record bad debt expense has no effect on retained earnings. C. The journal entry to write off an uncollectible account receivable decreases net income. D. The journal entry to write off an uncollectible account receivable has no effect on total assets.

D. The journal entry to write off an uncollectible account receivable has no effect on total assets.

Which of the following account balances would notbe closed at year-end? A. Depreciation Expense B. Gain on sale of building. C. Dividends. D. Unearned revenue. E. Consulting Revenue.

D. Unearned revenue.

A company uses the percent of receivables method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: A/R $390,000 debit Allowance for uncollectible 650 credit accounts Net Sales 950,000 credit All sales are made on credit. Based on past experience, the company estimates that 6% of receivables are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared? A. $24,050 B. $6,400 C. $5,700 D. $23,400 E. $22,750

E. $22,750

Deacon Corp. has provided the following information about one of its products: Date | Transaction | # of Units | Cost per Unit 1/1 | Beg. Inventory | 200 | $140 6/5 | Purchase | 400 | $160 11/10 | Purchase | 100 | $200 On September 12, Deacon sold 400 units at $220 per unit. Using a periodic system, what is Deacon's cost of goods sold using the weighted average cost method? A. $48,000. B. $50,000. C. $60,000. D. $62,000. E. $64,000.

E. $64,000.

Hull Company reported the following income statement information for the current year: Sales: $427,000 Cost of goods sold: Beginning inventory: $157,500 Cost of goods purchased: $290,000 Cost of goods available for sale: $447,500 Ending inventory: $161,000 Cost of goods sold: $286,500 Gross profit: $140,500 The beginning inventory balance is correct. However, the ending inventory figure was overstated by $37,000. Given this information, the correct gross profit would be: a. $103,500. b. $140,500. c. $177,500. d. $116,500. e. $120,500.

a. $103,500

Firefly Inc. sold land for $225,000 cash. The land had been purchased five years earlier for $275,000. The loss on the sale was reported on the income statement. On the statement of cash flows, what amount should Firefly report as an investing activity from the sale of the land? a. $225,000 b. $275,000 c. $50,000 d. $500,000

a. $225,000

Clabber Company has bonds outstanding with a par value of $109,000 and a carrying value of $102,700. If the company calls these bonds at a price of $99,500, the gain or loss on retirement is: a. $3,200 gain. b. $6,300 loss. c. $9,500 loss. d. $6,300 gain. e. $3,200 loss.

a. $3,200 gain.

Marshland Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: Cash dividends declared for the year: $40,000 Cash dividends payable at the beginning of the year: $17,000 Cash dividends payable at the end of the year: $13,000 The amount of cash paid for dividends was: a. $44,000. b. $40,000. c. $57,000. d. $53,000. e. $36,000.

a. $44,000.

Hall Company sells merchandise with a one-year warranty. In the current year, sales consisted of 4,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 20% of the repairs will be made in the current year and 80% in the next year. In the current year's income statement, Hall should show warranty expense of a. $45,000 b. $13,500 c. $31,500 d. $0

a. $45,000

Inventory at the end of the year was understated. Which of the following statements correctly states the effect of the error? a. net income is understated b. net income is overstated c. cost of goods sold is understated d. inventory reported on the balance sheet is overstated

a. net income is understated

Northington, Inc. is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from investing activities: Net income: $182,000 Gain on the sale of equipment: 12,300 Proceeds from the sale of equipment: 92,300 Depreciation expense - equipment: 50,000 Payment of bonds at maturity: 100,000 Purchase of land: 200,000 Issuance of common stock: 300,000 Increase in merchandise inventory: 35,400 Decrease in accounts receivable: 28,800 Increase in accounts payable: 23,700 Payment of cash dividends: 32,000 a. ($107,700). b. $107,700. c. ($200,000). d. ($139,700). e. ($207,700).

a. ($107,700).

Which of the following accounts should be closed to Income Summary at the end of the fiscal year? a. Service Revenue b. Equipment c. Prepaid Insurance d. Unearned Rent

a. Service Revenue

A check for $342 was erroneously charged by the bank as $432. In order for the bank reconciliation to balance, you must add $90 to the bank statement balance. a. True b. False

a. True

A check drawn by a company for $340 in payment of a liability was recorded in the journal as $430. This item would be included on the bank reconciliation as a(n) a. addition to the balance per the company's records b. addition to the balance per the bank statement c. deduction from the balance per the bank statement d. deduction from the balance per the company's records

a. addition to the balance per the company's records

A check drawn by a company in payment of a voucher for $965 was recorded in the journal as $695. What entry is required in the company's accounts? a. debit Accounts Payable; credit Cash b. debit Cash; credit Accounts Receivable c. debit Cash; credit Accounts Payable d. debit Accounts Receivable; credit Cash

a. debit Accounts Payable; credit Cash

The adjusting entry for gym memberships earned that were previously recorded in the unearned gym memberships account is a. debit Unearned Gym Memberships; credit Gym Memberships Revenue b. debit Gym Memberships Revenue; credit Unearned Gym Memberships c. debit Unearned Gym Memberships; credit Prepaid Gym Memberships d. debit Gym Memberships Expense; credit Unearned Gym Memberships

a. debit Unearned Gym Memberships; credit Gym Memberships Revenue

A company with 100,000 authorized shares of $4 par common stock issued 50,000 shares at $9. Subsequently, the company declared a 2% stock dividend on a date when the market price was $10 a share. The effect of the declaration and issuance of the stock dividend is to a. decrease retained earnings, increase common stock, and increase paid-in capital b. increase retained earnings, decrease common stock, and decrease paid-in capital c. increase retained earnings, decrease common stock, and increase paid-in capital d. decrease retained earnings, increase common stock, and decrease paid-in capital

a. decrease retained earnings, increase common stock, and increase paid-in capital

A check drawn by a company in payment of a voucher for $965 was recorded in the journal as $695. This item would be included in the bank reconciliation as a(n) a. deduction from the balance per the company's records b. addition to the balance per the bank statement c. deduction from the balance per the bank statement d. addition to the balance per the company's records

a. deduction from the balance per the company's records

Earning revenue a. increases assets, increases stockholders' equity b. increases assets, decreases stockholders' equity c. increases one asset, decreases another asset d. decreases assets, increases liabilities

a. increases assets, increases stockholders' equity

Cushman Company had $832,000 in sales discounts of $12,480, sales returns and allowances of $18,720, cost of goods sold of $395,200, and $286,210 in operating expenses. Gross profit equals: a. $119,390. b. $405,600. c. $418,080. d. $424,320. e. $800,800.

b. $405,600.

Texas Inc. has 10,000 shares of 6%, $125 par value preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31. What is the annual dividend on the preferred stock? a. $60 per share b. $75,000 in total c. $10,000 in total d. $0.75 per share

b. $75,000 in total

Which of the following is not considered to be a liability? a. Wages Payable b. Accounts Receivable c. Unearned Revenues d. Accounts Payable

b. Accounts Receivable

On September 12, Vander Company sold merchandise in the amount of $7,400 to Jepson Company, with credit terms of 3/10, n/30. The cost of the items sold is $4,800. Jepson uses theperiodic inventory system. Jepson pays the invoice on September 18 and takes the appropriate discount. The journal entry that Jepson makes on September 18 is: a. Dr. Purchases 7,178; Cr. Cash 7,178 b. Dr. Accounts payable 7,400; Cr. Purchase discounts 222; Cr. Cash 7,178 c. Dr. Cash 7,178; Dr. Purchases discounts 222; Cr. Accounts payable 7,400 d. Dr. Cash 7,178; Cr. Accounts receivable 7,178 e. Dr. Accounts payable 7,400; Cr. Merchandise inventory 222; Cr. Cash 7,178

b. Dr. Accounts payable 7,400; Cr. Purchase discounts 222; Cr. Cash 7,178

Dividends paid to stockholders decrease assets and increase equity. a. True b. False

b. False

If a building is appraised for $85,000, offered for sale at $90,000, and the buyer pays $80,000 cash for it, the buyer would record the building at $85,000. a. True b. False

b. False

If the amount of a bond premium on an issued 11%, 4-year, $100,000 bond is $12,928, the annual interest expense is $5,500. a. True b. False

b. False

If the debit portion of an adjusting entry is to an asset account, then the credit portion must be to a liability account. a. True b. False

b. False

If the liabilities owed by a business total $300,000 and stockholders' equity is equal to $300,000, then the assets also total $300,000. a. True b. False

b. False

If the trial balance is in balance, it can be assumed that all journal entries were posted correctly and no errors were made. a. True b. False

b. False

If total assets decreased by $30,000 during a specific period and stockholders' equity decreased by $35,000 during the same period, the period's change in total liabilities was a $65,000 increase. a. True b. False

b. False

Under the periodic inventory system, the cost of goods sold is equal to the beginning inventory plus the cost of merchandise purchased plus the ending inventory. a. True b. False

b. False

When the effective interest rate method of amortization is used, the amount of interest expense for a given period is calculated by multiplying the face rate of interest by the bond's carrying value at the beginning of the given period. a. True b. False

b. False

Which of the accounts below would be closed by posting a debit to the account? a. Unearned Revenue b. Fees Earned c. Dividends d. Miscellaneous Expense

b. Fees Earned

Which of the following pairs of accounts could notappear in the same adjusting entry? a. Fees Earned and Unearned Fees b. Interest Income and Interest Expense c. Rent Expense and Prepaid Rent d. Salaries Payable and Salaries Expense

b. Interest Income and Interest Expense

Kristin's Boutiques has identified the following items for possible inclusion in its December 31 inventory. Which of the following would not be included in the year-end inventory? a. Merchandise purchased FOB shipping point was picked up by the freight company but had still not arrived at Kristin's Boutique as of December 31. b. Kristin has in its warehouse merchandise on consignment from Abby Co. c. Kristin has sent merchandise to various retailers on a consignment basis. d. Kristin has inventory on hand which has been returned by customers because of wrong size.

b. Kristin has in its warehouse merchandise on consignment from Abby Co.

Cumberland Co. sells $2,000 of inventory to Hancock Co. for cash. Cumberland paid $1,250 for the merchandise. Under a perpetual inventory system, which of the following journal entry(ies) would be recorded? a. debit Cash, $2,000; credit Inventory, $1,250 b. debit Cash, $2,000; credit Sales, $2,000; and debit Cost of Goods Sold, $1,250; credit Inventory, $1,250 c. debit Cash, $1,250; credit Sales, $1,250 d. debit Accounts Receivable, $2,000; credit Sales, $2,000; and debit Cost of Goods Sold, $1,250; credit Inventory, $1,250

b. debit Cash, $2,000; credit Sales, $2,000; and debit Cost of Goods Sold, $1,250; credit Inventory, $1,250

A business paid $7,000 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation was to a. increase an asset, decrease another asset b. decrease an asset, decrease a liability c. increase an asset, increase a liability d. increase an asset, increase stockholders' equity

b. decrease an asset, decrease a liability

Use the following information and the indirect method to calculate the net cash provided or used by operating activities: Net income: $86,900 Depreciation expense: 13,600 Gain on sale of land: 6,700 Increase in merchandise inventory: 3,650 Increase in accounts payable: 7,750 a. $17,100. b. $31,600. c. $97,900. d. $38,300. e. $16,200.

c. $97,900.

The proper journal entry to record the receipt of inventory purchased on account in a periodic inventory system would be a. Dr. Inventory 1,600 , Cr. Accounts Payable 1,600 b. Dr. Office Supplies 1,600, Cr. Accounts Payable 1,600 c. Dr. Purchases 1,600, Cr. Accounts Payable 1,600 d. Dr. Purchases 1,600, Cr. Accounts Receivable 1,600

c. Dr. Purchases 1,600, Cr. Accounts Payable 1,600

Which of the following entries records the acquisition of office supplies on account? a. Office Supplies, debit; Cash, credit b. Cash, debit; Office Supplies, credit c. Office Supplies, debit; Accounts Payable, credit d. Accounts Receivable, debit; Office Supplies, credit

c. Office Supplies, debit; Accounts Payable, credit

If Dakota Company issues 1,500 shares of $6 par common stock for $75,000, a. Common Stock will be credited for $75,000 b. Paid-In Capital in Excess of Par will be credited for $9,000 c. Paid-In Capital in Excess of Par will be credited for $66,000 d. Cash will be debited for $66,000

c. Paid-In Capital in Excess of Par will be credited for $66,000

The interest expense recorded on an interest payment date is increased a. only if the market rate of interest is less than the stated rate of interest on that date b. by the amortization of premium on bonds payable c. by the amortization of discount on bonds payable d. only if the bonds were sold at face value

c. by the amortization of discount on bonds payable

The purchase of supplies on account was recorded and posted as a debit to Supplies for $500 and a credit to Accounts Receivable for $500. The correcting entry would include a:​ a. credit to Accounts Receivable for $500 b. credit to Accounts Receivable for $1,000 c. credit to Accounts Payable for $500 d. credit to Accounts Payable for $1,000

c. credit to Accounts Payable for $500

11. What is the major difference between a periodic and perpetual inventory system? a. Under the periodic inventory system, the purchase of inventory will be debited to the Purchases account. b. Under the periodic inventory system, no journal entry is recorded at the time of the sale of inventory for the cost of the inventory. c. Under the periodic inventory system, all adjustments such as purchase returns and allowances and discounts are accounted for in separate accounts. d. All of the answers are correct.

d. All of the answers are correct.

Which of the following entries records the receipt of cash from clients on account? a. Accounts Payable, debit; Fees Earned, credit b. Accounts Receivable, debit; Fees Earned, credit c. Accounts Receivable, debit; Cash, credit d. Cash, debit; Accounts Receivable, credit

d. Cash, debit; Accounts Receivable, credit

Which of the following is true? a. If using the double-declining-balance method, the total amount of depreciation expense during the life of the asset will be the highest. b. If using the units-of-output method, it is possible to depreciate more than the depreciable cost. c. If using the straight-line method, the amount of depreciation expense during the first year is higher than that of the double-declining-balance. d. Regardless of the depreciation method, the amount of total depreciation expense during the life of the asset will be the same.

d. Regardless of the depreciation method, the amount of total depreciation expense during the life of the asset will be the same.

Which of the following account groups are temporary/nominal accounts? a. Cash, Dividends, Wages Payable b. Prepaid Insurance, Equipment, Fees Earned c. Common Stock, Dividends, Income Summary d. Rent Revenue, Fees Earned, Miscellaneous Expense

d. Rent Revenue, Fees Earned, Miscellaneous Expense

Receipts from cash sales of $3,200 were recorded incorrectly in the cash receipts journal as $2,300. This item would be included on the bank reconciliation as a(n) a. deduction from the balance per company's records b. addition to the balance per bank statement c. deduction from the balance per bank statement d. addition to the balance per company's records

d. addition to the balance per company's records

Selling the bonds at a premium has the effect of a. raising the effective interest rate above the stated interest rate b. attracting investors that are willing to pay a lower rate of interest than on similar bonds c. causing the interest expense to be higher than the bond interest paid d. causing the interest expense to be lower than the bond interest paid

d. causing the interest expense to be lower than the bond interest paid

If the physical count of inventory revealed $158,000 of inventory on hand and the inventory records reported $163,000, what would be the necessary adjusting entry to record inventory shrinkage? a. debit Inventory, $158,000; credit Cost of Goods Sold, $158,000 b. debit Inventory, $5,000; credit Cost of Goods Sold, $5,000 c. debit Cost of Goods Sold, $163,000; credit Inventory, $158,000 d. debit Cost of Goods Sold, $5,000; credit Inventory, $5,000

d. debit Cost of Goods Sold, $5,000; credit Inventory, $5,000

The entry to close the appropriate insurance account at the end of the accounting period is a. debit Income Summary; credit Prepaid Insurance b. debit Prepaid Insurance; credit Income Summary c. debit Insurance Expense; credit Income Summary d. debit Income Summary; credit Insurance Expense

d. debit Income Summary; credit Insurance Expense

The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to a. decrease total liabilities and stockholders' equity b. increase total expenses and total liabilities c. increase total assets and stockholders' equity d. decrease total assets and stockholders' equity

d. decrease total assets and stockholders' equity

If accounts payable have increased during a period, a. revenues on an accrual basis are less than revenues on a cash basis b. expenses on an accrual basis are less than expenses on a cash basis c. expenses on an accrual basis are the same as expenses on a cash basis d. expenses on an accrual basis are greater than expenses on a cash basis

d. expenses on an accrual basis are greater than expenses on a cash basis

The post-closing trial balance differs from the adjusted trial balance in that it does not a. take into account closing entries b. take into account adjusting entries c. include balance sheet accounts d. include income statement accounts

d. include income statement accounts

How does receiving a bill to be paid next month for services received affect the accounting equation? a. assets decrease; stockholders' equity decreases b. assets increase; liabilities increase c. liabilities increase; stockholders' equity increases d. liabilities increase; stockholders' equity decreases

d. liabilities increase; stockholders' equity decreases