Exam 3

Credit terms of 2/15, n/45 indicate that which of the following sales discounts is being offered?

2% discount

Abe & Anna Split Ice Cream Parlor paid $1,750 cash for a 5-month advertising contract on September 30, 20X1. The amount of advertising expense reported on the Income Statement for the year ending December 31, 20X1, for this advertising contract is

$1,050

Hour Place Clock Shop sold a grandfather clock for $1,800 subject to a 9% sales tax. The entry in the general journal will include a credit to Sales for

$1,800

For the current fiscal year, Purchases were $187,000, Purchases Returns and Allowances were $4,200 and Freight In was $10,500. If the beginning merchandise inventory was $98,000 and the ending merchandise inventory was $103,000, the Cost of Goods Sold is:

$188,300

Stan Still Stationery Store's employees are paid every Friday for a five day work week and are paid a total of $1,250 per day. If December 31, 20X1, is on a Wednesday, the amount of the adjusting entry for accrued wages is:

$3,750

If a firm had sales of $340,000 during a period and sales returns and allowances of $28,000, its net sales were

$312,000

Tune Tones Instrument Tuning Company owes Mandy Lynn's Music Studio $3,300 as of November 1. During November, Tune Tones purchased merchandise from Mandy Lynn totaling $5,400 and made payments on account to Mandy Lynn in the amount of $2,600. The amount Tune Tones owes Mandy Lynn on November 30 is:

$6,100

Merchandise is sold on credit for $590 plus 5 percent sales tax. The journal entry to record the sale will include a debit to Accounts Receivable for

$619.50

When an accounts receivable subsidiary ledger is used, the Accounts Receivable account in the general ledger is considered to be a(n) __________ account.

control

Cash, items that will normally be converted to cash, and items that will be used up within one year are called ____________________.

current assets

On a classified balance sheet, Accounts Payable would appear in the ____________________ section.

current liabilities

The adjusting entry to record accrued interest on a note payable requires a

debit to Interest Expense and a credit to Interest Payable.

Sales Returns and Allowances have the effect of

Decreasing total revenue

The stock of goods on hand to sell to consumers is called _________

Merchandise Inventory

Accumulated Depreciation appears in the

Plant and Equipment section of the balance sheet.

Which of the following is not a current liability?

Prepaid insurance

On May 1, Brown's Antiques paid $18,000 for 12 months of advance rent on its store and immediately debited the asset account Prepaid Rent for the full amount. Select the adjusting entry made on December 31, to record the amount of rent that had expired.

Rent Expense- Debit- 12,000 Prepaid Rent- Credit- 12,000

Which of the following statements is correct?

The credit terms, 2/10, n/30, allow the customer to take a 2 percent discount if payment is made within 10 days of the invoice, otherwise payment is due in full in 30 days.

The sales discounts account is classified as

a contra revenue account

On October 1, Jerry's Lighting purchased merchandise with a list price of $10,300 with credit terms of 2/15, n/45. On October 3, Jerry's returns $1,900 of the merchandise. Assuming a periodic inventory system is used and Jerry's pays the remaining amount owed on the purchase within the discount period, Jerry's journal entry to record the payment, would include

a debit to Accounts Payable for $8,400.

The procedure that most nearly attains the objective of matching revenues and expenses to specific accounting periods is called the __________ basis of accounting.

accrual

During the year, Spirit Fun had net credit sales of $800,000. Past experience shows that 1.5 percent of the firm's net credit sales will be uncollectible. Determine the adjusting entry needed to recognize the estimated expense for these uncollectible accounts.

debit Uncollectible Accounts Expense $12,000 and credit Allowance for Doubtful Accounts $12,000. Correct

Assuming a periodic inventory system is used, identify the statement below that is corret

Another name that may be used for the freight in account is "Transportation In"

The entry to record a scale of merchandise on credit that is subject to sales tax includes a(n) _____________

Credit to sales tax payable

Property, plant, and equipment are long-term, tangible assets that require end-of-period adjustments for__________.

depreciation

Inventory turnover is calculated by

dividing cost of goods sold by average inventory.

The current ratio is calculated by

dividing current assets by current liabilities

Accrued income is income that has been

earned but not received.

An adjusting entry is usually not required for revenue that is

earned, recorded and paid for by the customer in one period.

The difference between net sales and the cost of goods sold is called the ____________________.

gross profit on sales

Sales Tax Payable is classified as a(n) __________ account.

liability

With the accrual basis of accounting, revenue from a credit sale is recognized

on the date of the sale.

The account used to record products returned by a buyer on the seller's books is __________.

sales returns and allowances

A list of creditors and the balances owed to them is called a __________.

schedule of accounts payable

A list of all unpaid balances in the accounts receivable subsidiary ledger is called a(n) __________.

schedule of accounts receivable

An income statement that has one total for all revenues and one total for all expenses is known as a

single-step income statement.

Accrued expenses are

used in one period but not paid for until a later period.

To determine the amount of the annual depreciation, the depreciable base is divided by the __________.

useful life in years

On September 1, 20X1, a firm accepted a 6-month, 9% note for $32,000 from a customer with an overdue account balance. The accrued interest recorded for this note on December 31, 20X1, is

$960

A retailer recorded the following in June: cash sales $3,000; credit sales, $10,000; sales returns and allowances, $500. Assuming the sales tax rate is 8 percent, the entry to record the sales tax payment includes a debit to Sales Tax Payable for

$1,000

On September 1, 20X1, a firm purchased a 1-year insurance policy for $5,700 and paid the full premium in advance. The insurance expense associated with this policy for the year ending December 31, 20X1, is

$1,900

On November 1, 20X1, a firm accepted a 4 month, 10 percent note for $720 from a customer with an overdue balance. The accrued interest recorded for this note for the year ended December 31, 20X1, is

$12

The beginning capital balance shown on a statement of owner's equity is $44,000. Net loss for the period is $13,500 and the owner withdrew $17,500 cash from the business and made no additional investments during the period. The owner's capital balance at the end of the period is

$13,000

On April 1, 20X1, a firm accepted a 3-month, 9 percent note for $6,000 from a customer with an overdue balance. The interest income on this note for the year ended June 30, 20X1, is

$135

A firm had purchases of $17,000, freight charges of $340, and purchases returns and allowances of $1,500 during one month. Its net delivered cost of purchases was

$15,840

On Deck Sports Memorabilia store sells a Babe Ruth rookie card for $4,000 on account. If the sales tax on the sale is 8%, what is the amount debited to Accounts Receivable.

$4,320

Which of the following cash discounts is being offered if the credit terms are 3/10, n/60?

3%

Assuming a periodic inventory system is used, the entry to record a purchase of merchandise on credit includes

A debit to purchases and a credit to accounts payable

On October 12, Equipment Incorporated sells $53,000 worth of equipment on account to a credit customer with credit terms of 1/10, n/30. Assume the sale is not subject to tax. Select the correct entry to record the sale on October 12.

Accounts Receivable- Debit 53,000 Sales - Credit 53,000

Which of the following accounts will appear on the postclosing trial balance?

Accumulated Depreciation

On June 12, Candy Suppliers sells $7,000 of goods on account to a credit customer with credit terms 2/15, n/45. Assume the sale is not subject to tax. On June 15, the customer returned $700 of the goods due to defect. Assume the customer pays within the discount period, select the correct entry to record the receipt of the customer's payment:

Cash- Debit- 6,174 Sales Discounts- Debit- 126 Accounts Receivable- Credit- 6,300

On June 12, Music, Incorporated sells $4,000 of goods on account to a credit customer with credit terms of 1/10, n/30. If the customer pays on June 20, select the correct entry to record the receipt of the customer's payment:

Cash- debit 3,960, Sales Discounts- debit 40, Accounts Receivable-credit 4,000

On October 1, 20X1, Paige Turner Publishing received $55,800 in cash for monthly subscriptions covering one year, recording the entry as a debit to Cash and a credit to Unearned Subscriptions. The correct adjusting entry at December 31, 20X1, is

Debit Unearned Subscriptions $13,950; credit Subscriptions Income $13,950.

Assuming a periodic inventory system is used, the entry to record a return of merchandise purchased on credit would:

Debit accounts payable and credit purchases returns and allowances

Identify the statement below that is true regarding the Allowance for Doubtful Accounts account.

The account has a normal credit balance and is reported on the balance sheet.

On the balance sheet, the cost of a fixed asset less its accumulated depreciation to date is the asset's ___________________.

book value

The Sales Returns and Allowances account has a normal __________

debit balance and is a contra revenue account

Assuming a periodic inventory system is used, the journal entry to record the purchase of merchandise on account for $5,500 with freight of $370 prepaid and added to the invoice is

debit purchases $5,500, debit freight in $370, credit accounts payable $5,780

A gross profit percentage of 20 percent means that for every $1 of net sales, gross profit amounts to $___________________.

$0.20

At the end of the year Stan Still Stationery Store had the following balances: Sales $680,000; Sales Discounts $2,630; Sales Returns and Allowances $15,500; Sales Salaries Expense $74,000. The Net Sales for the year are:

$661,870

Rose Bush Nursery purchased a delivery truck on July 1, 20X1, for $81,000. The truck is expected to have a useful life of 5 years and a residual value of $7,200. The company uses the straight-line method of depreciation. What is the amount of depreciation expense on the truck for the year ended December 31, 20X1?

$7,380

Modern Candy, a wholesaler, sold a crate of candy for $800 on account to a customer with credit terms of 3/20, n/60. If the customer pays within the discount period, how much cash will Modern Candy receive when it is paid?

$776.00

Hugh Morris Company pays weekly wages of $13,000 every Friday for a five day week ending on that day. If the last day of the year is on Tuesday, the adjusting entry to record the accrued wages is:

debit Wages Expense $5,200; credit Wages Payable $5,200

Robin Banks, Incorporated owns an armored truck which was purchased for $79,000. The Accumulated Depreciation on the truck is $55,500. The book value of the armored truck is

$23,500

If Lacy's Department Store charges 6 percent sales tax, the amount of sales tax collected on a $800 sale would be

$48