Financial Accounting Multiple Choice Questions

Brown Company has 1,000 shares of 5%, $100 par cumulative preferred stock outstanding at December 31, 2021. No Dividends have been paid on this stock for 2020, or 2021. Dividends in arrears at December 31, 2021 total

$10,000

A company purchased factory equipment on April 1. 2022 for $160,000. It is estimated thay the equipment will have a $20,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2022 is:

$10,500

Linda's Phone Repair Shop started the year with total assets of $300,000 and total liabilities of $200,000. During the year, the business recorded $300,000 in computer repair revenues, $200,000 in expenses. The net income reported by Linda's Phone Repair Shop for the year as

$100,000

Reliable Insurance Company collected a premium of $36,000 for a 1-year insurance policy on May 1. What amount should Reliable report as a current liability for Unearned Insurance Revenue at December 31?

$12,000

Lifetime sells softball equipment. On November 14, they shipped $3000 worth of softball uniforms to Palos Middle School, terms 2/10, n/30. On November 30, Palos Middle School returned $300 with of defective merchandise. Lifetime has received no payments from wither school as of month end. What will be the recognized as net accounts receivable on the balance sheet as of November 30?

$2700

Eckman Comoany purchased equipment for $120,000 on January 1, 2021, and will use the double-declining-balance method of depreciation. It is estimated that the equipment will have a 5-year life and a $6,000 salvage value at the end of its useful life. The amount of depreciation expense recognized in the year 2022 will be

$28,800

A retail store credited the Sales Revenue account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue account amounted to $630,000, what is the amount of the sales taxes owed to the taxing agency?

$30,000

On July, 1 2022, Jenks Company purchased the copyright to Jackson Computer tutorials for $324,000. It is estimated that the copyright will have a useful life of 5 years with an estimated salvage value of $24,000. The amount of Amortization Expense recognized for the year 2022 would be

$30,000

Vega Corporation's December 31, 2021 balance sheet showed the following: 8% preferred stock, $20 par value, cumulative, 10,000 shared authorized; 7,500 shares issued $150,000 Common Stock, $10 par value, 1,000,000 shares authorized; 975,000 shares issued, 960,000 shares outstanding 9,750,000 Paid-In Capital in excess of par - preferred stock 30,000 Paid-In capital in excess of par - common stock 13,500,000 Retained earnings 3,750,000 Treasury Stock (15,000 shares) 315,000 Vega declared and paid a $58,000 cash dividend on December 15, 2021. If dividends in arrears prior ro that date were $10,000, Vega's common stockholders received

$36,000

At January 31, 2021, the balance in Aislers Inc.'s supplies account was $750. During February, Aislers purchased supplies of $900 and used supplies of $1125. At the end of February, the balance of the supplies account would be:

$525 debit

Engler Company purchases a new delivery truck for $55,000. The sales taxes are $4,000. The logo of the company is pained on the side of the truck for $1,600. The truck license is $160. The truck undergoes safety testing for $290. What does Engler record as the cost of the new truck?

$60,890

Wesley Hospital installs a new parking lot. The paving cost $40,000 and the lights to illuminate the new parking lot cost $25,000. Which of the following statements is true with respect to these additions?

$65,000 should be debited to Land improvements

If total liabilities increased by $40,000 and stockholders' equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during the same period?

$70,000 increase

An Analysis and aging if the accounts receivable of High Company at December 31 revealed the following data: Accounts Receivable $900,000 Amounts expected to become uncollectable $56,000 The cash realizable value of the accounts receivable at December 31, after adjustment, is:

$844,000

On March 9, Way To Go Industries purchases supples of $2,000 on account. The entry to record the purchase will include

A debit to Supplies and a credit to Accounts Payable

A dividend is

A distribution of the company's earnings to its stockholders

Which of the following statements reflects the transferability of ownership rights in a corporation?

A stockholder may dispose of part or all of his shares

The term "receivables" refers to

Accounts due from individuals or companies

The net realizable value is the difference between the

Accounts receivable balance and the allowance account balance

Expenses incurred but not yet paid or recorded are called

Accrued expenses

An adjusting entry

Affects a balance sheet account and an income statement account

The cost of a purchased building includes all of the following except

All of these answers are correct

If a resource has been consumed but a bill has not been received at the ebd of the accounting period, then

An adjusting entry should be made recognizing the expense

In computing depreciation, salvage value is

An estimate of a plant asset's value at the end of its useful life

The book value fo an asset is equal to the

Asset's cost less accumulated depreciation

Mozart Company provided consulting services and billed the client $2,500. As a result of this event

Assets and stockholders' equity both increased by $2,500

A balance sheet shows:

Assets, liabilities, and stockholders' equity

Which of the following represents the largest number of common shares?

Authorized shares

Cost of goods sold is computed from the following equation:

Beginning inventory + cost of goods sold - ending inventory

A gain or loss on disposal of a plant asset is determined by comparing the

Book value of the asset with the proceeds from its sale

When preferred stock is cumulative, preferred dividends are not declared in a period are

Called dividends in arrears

Unearned revenues are

Cash received and a liability recorded before services are performed

Treasury Stock is a(n)

Contra stockholders' equity account

The selling proce of a $10,000, 5-year bond, will be less than $10,000 if the

Contractual interest rate is less than the market interest rate

A factor which distinguished the corporate form of organization from a sole proprietorship or partnership is that a

Corporation is subject to more federal and state government regulations

The historical cost principle requires that when assets are acquired, they be recorded at

Cost

An accountant has debited an asset account for $2,000 and credited a liability account for $1,500. What can be fone to complete the recording og the transaction?

Credit a different asset account for $500

Seven thousand shares of treasury stock of Marker, Inc., Previously acquired at $14 per share are sold at $20 per share. The entry to record this transaction will include a

Credit to Paid-In Capital from Treasury Stock for $42,000

Ward Corporation issues 5,000, 10-year, 8%, $1,000 bonds dated January 1, 2018, at 103. The journal entry to record the issuance will show a

Credit to Premium on Bonds Payable for $150,000

An account will have a credit balance if:

Credits exceed the debits

A consulting company provides services for $10,200 for the month of December but has not billed the customer. WHeat could be the entry to record adjusting entry at December 31?

DR: Accounts Receivable and CR: Revenue

Haven Company uses the percentage method of receivables method for recording bad debt expense. The accounts receivable balance is $600,000. Management estimates that 4% of accounts receivable will be uncollectable. What adjusting entry will Haven Company make to record bad debt expense if the Allowance for Doubtful Accounts has a credit balance before adjustment?

DR: Bad Debt Expense 19,000 CR: Allowance for Doubtful Accounts 19,000

Pickett Company typically sells subscriptions on an annual basic and published six times a year. The Magazine sells 90,000 subscriptions in January at $15 each. What entry is made in January to record the sale of the subscriptions?

DR: Cash 1,350,000 CR: Unearned Subscription Revenue 1,350,000

Admite County Bank agreed to lend Givens Brick Company $600,000 on January 1. Givens Brick Company signs a $600,000, 8%, 9-month note. What is the adjusting entry required if Givens Brick Company prepared financial statements on June 30?

DR: Interest Expense 24,000 CR: Interest Payable24,000

On October 1, Steve's Carpet Service borrows $350,000 from First National Bank on a 3-month, $350,000, 8% note. The entry by Steve's Carpet Service to record payment of the note and accrued interest on January 1 is

DR: Notes Payable 350,000 DR: Interest Payable 7,000 CR: Cash 357,000

S. Lamar performed legal services for E. Garr. Due to a cash shortage, an agreement was reached whereby E. Garr would pay S. Lamar a legal fee of approximately $12,000 by issuing 3,000 shares of its common stock (par $1). The stock trades on a daily basis and the market price of the stock on the day the debt was settled is $4.50 per share. Given this information, the journal entry for E. Garr to record this transaction is:

DR: Organization Expense 13,500 CR: Common Stock 3,000 CR: Paid-In Capital in Excess of ParCommon 10,500

The balance in the Prepaid rent account before adjustment at the end of the year is $15,000, which represents three months' rent paid on December 1. The adjusting entry required on December 31 is to

Debit Rent Expense, $5,000; credit Prepaid Rent, $5,000

Ruter company purchased supplies costing $6,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of supplies revealed $1,000 still on hand. The appropriate adjusting journal entry to br made at the end of the period would be

Debit Supplies Expense, $5,000; Credit Supplies $5,000

Adjusting entries are required

Every time financial statements are prepared

If a company fails to record estimated bad debt expense,

Expenses are understated

The expense recognition principle matches

Expenses with revenues

Employee Payroll deductions include each of the following except

Federal unemployment taxes

Unearned Rent Revenue is

Generally reported as a current liability

The accounting process correctly sequenced as

Identification, recording, communication

Closing entries are made

In order to transfer net income (or loss) and dividends to the retained earnings account

Debits

Increase assets and decrease liabilities

Which one of the following is not an internal user of accounting information?

Investors of the company

Land improvements should be depreciated over the useful life of the

Land improvements

Liabilities are classified on the balance sheet as current or

Long-term

Goodwill can be recorded

Only when there is an exchange transaction involving the purchase of an entire business

Prepaid expenses are:

Paid and recorded in an asset account before they are used or consumed

If Vickers Company issues 5,000 shares of $5 par value common stock for $175,000

Paid-In Capital in Excess of Par will be credited for $150,000

The two ways thay a corporation can be classified by ownership are

Publicly held and privately held

Communication of economic events is the part of the accounting process that involves:

Recording and classifying information

All of the following are intangible assets except:

Research and development costs

In order to close the dividends account, the

Retained earnings account should be debited

The normal balance of any account is the

Side which increases that amount

If a company incurs legal costs in successfully defending its patent, these costs are recorded by debiting

The Patent account

The time period assumption states that:

The economic life of a business can be divided into artificial time periods

The LIFO inventory method assumes that the costy of the latest units purchased are:

The first to be allocated to cost of goods sold

If goods in transit are shipped FOB destination

The seller has legal title to the goods until they are delivered

Camper Van Company purchased equipment for $2600 cash. As a result of this event:

Total assets remained unchanged

The revenue recognition principle dictates that revenue should be recognized in the accounting records

When the performance obligation is satisfied

Liabilities

are existing debts and obligations

The exclusive right to reproduce and sell an artistic or published work is called a

copyright

The economic entity assumption requires that the activities:

of an entity be kept separate from the activities of its owner