IA I - D248

Debit allowance for doubtful accounts; credit accounts receivable When using the allowance method to write off an accounts receivable that is deemed uncollectible, allowance for doubtful accounts is debited, and accounts receivable is credited.

A business realizes that collection from a customer will be impossible. The accountant needs to write off the uncollectible account using the allowance method. Which journal entry should be used for this purpose? Debit allowance for doubtful accounts; credit accounts receivable Debit bad debt expense; credit allowance for doubtful accounts Debit bad debt expense; credit accounts receivable Debit allowance for doubtful accounts; credit bad debt expense

$1,442 Unit 5 Test

A company collects $1,500 of rent from a tenant at the end of the year. The company invests the rent money in an investment earning 4% interest per year. Assuming a 4% annual interest rate is appropriate, the implied annual interest is $1,500 × 0.04 = $60, and the present value of the rent is $1,500 × 0.96154 = $1,442. What is the discounted value of this rent at the beginning of Year 1? $1,442 $1,560 $1,500 $1,440

Inventory is understated; net income is unaffected. Since both the purchases and ending inventory are understated, the two errors balance each other out, and there is no effect on net income.

A company did not record the credit purchases of inventory and did not include this inventory in the ending inventory figures. What is the effect of this on the financial statements? Inventory is understated; net income is unaffected. Current ratio is unaffected; net income is understated. Accounts payable is overstated; purchases are overstated. Working capital is understated; cost of goods sold is understated.

$463,190 Unit 5 Test

A company expects to incur $1,000,000 in environmental remediation costs in 10 years to restore land at one of the production sites it is currently operating. Using an 8% interest rate, the implied annual interest is $1,000,000 × 0.08 = $80,000, and the present value of the remediation cost is $1,000,000 × 0.46319 = $463,190. Which amount must the company record currently as an asset retirement obligation (ARO) in accordance with generally accepted accounting principles (GAAP)? $1,000,000 $536,810 $1,800,000 $463,190

$463,190 Unit 5 Test

A company expects to incur $1,000,000 in environmental remediation costs in 10 years to restore land at one of the production sites it is currently operating. Using an 8% interest rate, the implied annual interest is $1,000,000 × 0.08 = $80,000, and the present value of the remediation cost is $1,000,000 × 0.46319 = $463,190. Which amount must the company record currently as an asset retirement obligation (ARO) in accordance with generally accepted accounting principles (GAAP)? $1,000,000 $536,810 $463,190 $1,800,000

$1,484,000 1,600,000+350,000-90,000+44,000-20,000-400,000 Unit 4 Test

A company has $1,600,000 of net income and $350,000 of amortization expense for Year 2. Between Year 1 and Year 2, accounts receivable increased by $90,000 and inventory decreased by $44,000. Accounts payable decreased by $20,000. The company distributed $400,000 to stockholders. What is the company's net change in cash, as reported on its cash flow statement? $1,134,000 $1,440,000 $1,484,000 $1,884,000

$334,000 250,000+60,000-12,000+6,000-10,000+40,000 Unit 4 Test

A company has $250,000 of net income for Year 2. The business recorded $60,000 of depreciation during Year 2. Between Year 1 and Year 2, accounts receivable increased by 12,000 and inventory decreased by $6,000. Accounts payable was unchanged. The company purchased a new truck for $50,000 with $10,000 in cash and $40,000 of long-term debt. If the company started Year 2 with $40,000, what was the company's cash balance at the end of Year 2? $294,000 $334,000 $344,000 $384,000

$160,000 80,000+12,000-12,000+6,000+4,000-20,000+90,000 Unit 4 Test

A company has $80,000 of net income for Year 2. The business recorded $12,000 of amortization during Year 2. Between Year 1 and Year 2, accounts receivable increased by 12,000 and inventory decreased by $6,000. Accounts payable increased by $4,000. The company purchased new equipment totaling $200,000, with $20,000 in cash and an equipment loan for the balance. If the company started Year 2 with $90,000, what was the cash balance at the end of Year 2? $70,000 $160,000 $180,000 $360,000

$10,000 Cash in the bank is the only item that is included on the cash line item. Restricted cash is on a separate line item, and bank overdrafts are recorded as current liabilities.

A company has cash in bank of $10,000, restricted cash in a separate account of $8,000, and a bank overdraft in an account at another bank of $3,000. Which amount should this company report as cash in the balance sheet? $10,000 $15,000 $18,000 $21,000

73 73 = 365 / ($200,000 / (( $30,000 + $50,000) / 2))

A company has current year sales of $200,000, net accounts receivable of $30,000, and prior year net accounts receivable of $50,000. What is the average number of days to collect receivables, rounded to the nearest whole number? 6 146 73 5

12.8 12.8 = ( ($500,000 / ($35,000 + $43,000) ) / 2). The accounts receivable turnover is calculated by taking net sales and dividing it by the average net accounts receivable.

A company has current year sales of $500,000, net accounts receivable of $35,000, and prior year net accounts receivable of $43,000. What is the accounts receivable turnover, rounded to the nearest one decimal place? 12.8 11.6 14.3 6.4

28.5 28.5 = 365 / ( ($500,000 / ($35,000 + $43,000) ) / 2)

A company has current year sales of $500,000, net accounts receivable of $35,000, and prior year net accounts receivable of $43,000. What is the average number of days to collect receivables, rounded to the nearest one decimal place? 25.6 56.9 31.4 28.5

Receivables Postdated checks should be classified as receivables on the year-end balance sheet.

A company has postdated checks of $10,000 at the end of the fiscal year. How should this item be reported on the year-end balance sheet? Receivables Cash equivalent Prepaids Cash

$3,900 Using the periodic system, the cost of goods sold is calculated as beginning inventory plus purchases minus ending inventory: ($2,000 + $3,000 - $1,400) = $3,900.

A company has the following balances in its accounts: •beginning inventory: $2,000 •purchases: $3,300 •ending inventory: $1,400 If the periodic system is used, what is the amount of cost of goods sold for the year? $3,900 $3,300 $2,700 $5,300

$204,450 Bank overdrafts are considered a liability and are not included in cash and cash equivalents.

A company has the following cash balances: Large bank $127,000 Small bank $17,000 Continental bank $(42,000) Petty cash $450 3-month treasury bill $60,000 CD maturing in 18 months$100,000 What is the amount of cash and cash equivalents that should be reported? $162,450 $102,450 $144,450 $204,450

17.6 17.6 = ( ( ($110,000 - $9,000) / ($4,000 + $7,500) ) / 2) The accounts receivable turnover is calculated by taking net sales and dividing it by the average net accounts receivable.

A company has the following financial information: What is the accounts receivable turnover for Year 2, rounded to the nearest one decimal place? 17.6 19.1 13.5 14.7

13.84 times ( ($180,000 / ($11,000 + $15,000) ) / 2) = 13.84 times

A company has the following information for the period just completed: ●gross sales: $200,000 ●beginning accounts receivable: $11,000 ●long-term notes receivables: $102,000 ●ending accounts receivable: $15,000 ●net sales: $180,000 What is this company's accounts receivable turnover? 15.38 times 12.00 times 13.84 times 18.18 times

$37,500 $37,500 = $30,000 + $500 + $7,000. Cash and cash equivalents reported on the balance sheet include cash in the bank, cash on hand, and investments with original maturities of 90 days or less.

A company has the following items at year-end: ●cash in bank: $30,000 ●petty cash: $500 ●short-term paper with maturity of two months: $7,000 ●postdated checks: $2,000 Which amount should be reported as cash and cash equivalents in the balance sheet? $39,500 $30,500 $30,000 $37,500

167.9 167.9 = 365 / ($25,000 / (($12,000 + $11,000) / 2)). The average days to sell inventory is calculated by taking 365 days a year and dividing it by the inventory turnover. It measures the average number of sales days that a company has inventory on hand.

A company has the following year-end information: What is the calculation of the average days to sell inventory for Year 2? 160.6 167.9 80.3 84

General and administrative expenses Unit 3 Test

A company incurred $400,000 in expenses related to its main office. Where should these expenses be reported on the multiple-step income statement? Sales expenses General and administrative expenses Other operation expenses Cost of goods sold

$40,539 Unit 5 Test

A company is leasing a machine for ten years. The annual payments of $5,000 are made at the beginning of the year. Assuming an annual interest rate of 5% is appropriate, the present value of 1 is 0.6139 × $5,000 = $3,070, the present value of an ordinary annuity is 7.7217 × $5,000 = $38,609, and the present value of an annuity due is 8.1078 × $5,000 = $40,539. Which value should this company use to record the machine? $50,000 $30,700 $38,609 $40,539

$38,609 Unit 5 Test

A company is leasing a machine for ten years. The annual payments of $5,000 are made at the end of the year. Assuming an annual interest rate of 5% is appropriate, the present value of 1 is 0.6139 x $5,000 = $3,070, the present value of an ordinary annuity is 7.7217 × $5,000 = $38,609, and the present value of an annuity due is 8.1078 × $5,000 = $40,539. Which value should this company use to record the machine? $40,539 $30,700 $38,609 $50,000

$5,800,000 Unit 4 Test

A company issues 100,000 shares of stock at $2 par value and raises $6,000,000 from investors. Which amount appears on the balance sheet in the additional paid-in capital account? $6,000,000 $5,800,000 $5,900,000 $200,000

$20,548 Unit 5 Test

A company issues a five-year zero-interest-bearing note for a new lathe it purchased for $25,000. The market rate of interest at the time the note was issued is 4%. Assuming an annual interest rate of 4% for five years is appropriate, the present value of the principal is $25,000 × 0.82193 = $20,548. Assuming an annual interest rate of 5% for 4 years is appropriate, the present value of the principal is $25,000 × 0.82270 = $20,568. Which amount should be recorded for the cost of the lathe? $30,000 $20,548 $20,568 $25,000

Debit Rent expense $30,000; Credit Prepaid rent $30,000 Unit 3 Test

A company paid $90,000 for August, September, and October office rent ($30,000 for each month) on July 25. If August rent expense was recorded in August, what would be the closing entry for rent for the month of September? Debit Prepaid rent $60,000; Credit Rent expense $60,000 Debit Prepaid rent $30,000; Credit Rent expense $30,000 Debit Rent expense $30,000; Credit Prepaid rent $30,000 Debit Rent expense $60,000; Credit Prepaid rent $60,000

Prepaid insurance of $240,000 Unit 4 Test

A company pays $360,000 for six months of property insurance on August 1. Which amount appears on the September 30 balance sheet? Prepaid insurance of $360,000 Prepaid insurance of $300,000 Prepaid insurance of $240,000 Prepaid insurance of $120,000

Insurance expense $1,000 Unit 3 Test

A company pays for vehicle insurance of $12,000 per year each year on January 1. What should appear on this company's income statement for the month of March? Prepaid insurance $3,000 Insurance payable $1,000 Insurance expense $3,000 Insurance expense $1,000

$28,334 Unit 5 Test

A company will receive payments of $10,000 at the beginning of each year for the next three years under a subscription contract. Assuming an annual interest rate of 6% is appropriate, the present value of an ordinary annuity is 2.67301 × $10,000 = $26,730, and the present value of an annuity due is 2.83339 × $10,000 = $28,334. Which amount must the company record for this sale in accordance with the generally accepted accounting principles (GAAP) if collection is reasonably assured? $10,000 $28,334 $30,000 $26,730

Earnings management Unit 3 Test

A company's investors are expecting earnings of $2.40 per share. A preliminary analysis of the company's financial statements indicates that earnings are $2.35 per share, which is below investor earnings. The company's chief financial officer decides to reduce the company's allowance for bad debt to increase earnings to $2.40 per share. Which accounting practice does this scenario depict? Asset management Earnings management Factoring Revenue enhancement

$600,000 Unit 4 Test

A construction company purchases 10 new trucks on January 1 of Year 1. The trucks are $90,000 each. The useful life is estimated to be four years, and the salvage value is estimated to be $10,000 for each truck. The company uses straight line depreciation for its trucks. What is the balance of the accumulated depreciation at the end of Year 3? $600,000 $675,000 $60,000 $400,000

Gain on disposal of equipment of $9,000, presented in other revenue and gains Unit 3 Test

A construction company sold one of its older bulldozers for $21,000. The company had fully depreciated the bulldozer to its salvage value of $12,000. The company's tax rate is 20%. How should this transaction be presented on the company's income statement? Gain on disposal of equipment of $9,000, presented in other revenue and gains Other revenue of $21,000, presented in other revenue and gains Gain on disposal of equipment of $18,000 (presented net of tax), presented after net income Other revenue of $18,000, presented in nonoperating income

$10,000 Unit 5 Test

A customer signs a noninterest-bearing note, promising to pay the company $11,664 in two years. The payment amount is based on an annual interest rate of 8%, which the company believes is appropriate, resulting in the present value of the note of $11,664 × 0.85734 = $10,000. Which amount must the company record as sales revenue from this transaction in accordance with generally accepted accounting principles (GAAP)? $1,664 $13,328 $10,000 $11,664

$8,108 Unit 5 Test

A landlord receives $1,000 in rent payments at the beginning of every month for ten periods. Assuming an annual interest rate of 5% is appropriate, the present value of 1 is 0.6139 × $1,000 = 614, the present value of an ordinary annuity is 7.7217 × $1,000 = $7,722, and the present value of an annuity due is 8.20178 × $1,000 = $8,108. What is the fair value of the ten rent payments, according to the Financial Accounting Standards Board (FASB)? $6,000 $6,140 $8,108 $7,722

$7,722 Unit 5 Test

A landlord receives $1,000 in rent payments at the end of every month for 10 months. Assuming an annual interest rate of 5% is appropriate, the present value of 1 is 0.6139 × $1,000 = $614, the present value of an ordinary annuity is 7.7217 × $1,000 = $7,722, and the present value of an annuity due is 8.108 × $1,000 = $8,108. What is the fair value of the 10 rent payments according to the Financial Accounting Standards Board (FASB)? $8,108 $7,722 $6,140 $10,000

Increase Cash flow from operating activities by $2,000; Increase Cash flow from investing activities by $10,000 Unit 4 Test

A landscaping firm sold one of its trailers for $10,000 and recorded a loss of $2,000 on the transaction. How would this transaction be presented on the company's cash flow statement? Decrease Cash flow from investing activities by $10,000 Increase Cash flow from operating activities by $2,000; Increase Cash flow from investing activities by $10,000 Increase Cash flow from operating activities by $2,000; Decrease Cash flow from investing activities by $10,000 Decrease Cash flow from investing activities by $2,000

As an impairment loss in other expenses and losses Unit 3 Test

A manufacturing company determines that the goodwill on the subsidiary it acquired last year has been impaired; the value of the subsidiary no longer exceeds its assets. Where would the company report this on its multiple-step income statement? As an extraordinary loss presented net of tax As a balance sheet item only - it would not be reported on the income statement As a goodwill amortization expense As an impairment loss in other expenses and losses

$20,000 $20,000 = $10,000 + $3,000 + $2,000 + $1,000 + $1,500 + $2,500. Inventory should include all costs except storage, purchasing department, and interest expense.

A manufacturing company has the following inventory-related costs: •direct materials: $10,000 •direct labor: $3,000 •indirect labor: $2,000 •indirect materials: $1,000 •manufacturing depreciation: $1,500 •manufacturing utilities: $2,500 •storage costs: $1,600 •purchasing department costs: $1,700 •interest expense: $800 How much is included in inventory? $20,000 $21,600 $23,300 $24,100

$1,400,000 Unit 4 Test

A merchandising concern paid $1,400,000 for inventory. The market value of the inventory is $1,600,000. The net realizable value of the inventory is $1,500,000. Substitute products are available for $850,000. Which amount appears on the balance sheet? $1,500,000 $1,400,000 $850,000 $1,600,000

Debit Salaries payable $8,000; Credit Cash $8,000 Unit 4 Test

A restaurant chain pays its general manager, who is a salaried employee, monthly. The general manager is paid on the 15th of each month for the prior month. The salary is $8,000 per month. Which journal entry should be made when the general manager is paid on December 15? Debit Salary expense $8,000; Credit Salaries payable $8,000 Debit Salaries payable $8,000; Credit Cash $8,000 Debit Cash $8,000; Credit Salaries payable $8,000 Debit Salaries payable $8000; Credit Salary expense $8,000

$54,000 Unit 4 Test

A retailer of home theater equipment reports a warranty liability on its balance sheet equal to 6% of sales. Customers have two calendar months to return defective products. Sales for April were $200,000. Sales for May were $400,000. Sales for June were 500,000. What is the maximum liability the company would report on its June 30 balance sheet? $30,000 $24,000 $54,000 $66,000

Decrease Cash flow from operating activities by $10,000; Increase Cash flow from investing activities by $50,000 Unit 4 Test

A retailer sold old store fixtures for $50,000 and recorded a gain of $10,000 on the transaction. How would this transaction be presented on the company's cash flow statement? Increase Cash flow from operating activities by $40,000 Decrease Cash flow from operating activities by $10,000; Increase Cash flow from investing activities by $50,000 Increase Cash flow from operating activities by $50,000 Decrease Cash flow from investing activities by $50,000; Increase Cash flow from operating activities by $10,000

$194,000 Unit 3 Test

A shoe company sold $200,000 worth of shoes in July. The company estimates its returns to be 3% of sales. The company's cost of goods sold is 60% of sales. The company uses a multiple-step income statement. What should net sales be on this company's July income statement? $74,000 $94,000 $194,000 $200,000

Neither infrequent nor unusual Unit 3 Test

A trucking company sustained $20,000 of uninsured damage when its driver backed into a loading dock. What is the nature of this loss? Infrequent but not unusual Unusual but not infrequent Neither infrequent nor unusual Infrequent and unusual

Investment in new electric trucks to reduce future operating costs Unit 4 Test

A trucking company's cash flow statement indicates that it has positive cash flow from operations but negative cash flow overall. Which item reported on the cash flow statement could be the cause of the overall negative cash flow? Investment in new electric trucks to reduce future operating costs Issue of additional shares of stock to increase working capital Increase in debt Decrease in accounts receivable

Monetary unit Unit 2 Test

Economic activity is measured without considering price-level changes according to generally accepted accounting principles (GAAP) as long as a certain assumption is met. Which assumption must be present? Monetary unit Time period Periodicity Going concern

$1,680,000 Unit 3 Test

Endothon Inc. pays its employees every two weeks on Fridays. Weekly payroll is $400,000 ($80,000 per day, no weekends). September 30 falls on a Monday. Employees will be paid on Friday, October 4, for wages earned through Friday, October 4. What is Endothon's payroll expense for September, assuming there are no holidays? $400,000 $1,360,000 $1,600,000 $1,680,000

$19,048 Unit 5 Test

Equipment is exchanged for a noninterest-bearing note. Payment of $20,000 on the note is to be made in one year. The market rate of notes of similar risk is 5%. Assuming an annual interest rate of 5% is appropriate, the present value of the principal is $20,000 × 0.95238 = $19,048. Assuming that a semiannual interest rate of 2.5% is appropriate, the present value of the principal is ($20,000/2) × 1.92742 = $19,274. What is the cost that should be recorded with the purchase of this equipment? $21,000 $19,048 $19,274 $20,000

$288,609 Unit 5 Test

Company A has agreed to pay Company B $100,000 at the beginning of each year for the next three years for rights to a patent. Assuming an annual interest rate of 4% is appropriate, the present value of an ordinary annuity is 2.77509 × $100,000 = $277,509, and the present value of an annuity due is 2.88609 × $100,000 = $288,609. What is the present obligation that Company A should record in accordance with generally accepted accounting principles (GAAP)? $312,000 $277,509 $288,609 $300,000

Company A's earnings are of a higher quality than Company B's earnings. Unit 3 Test

Company A has earnings that include sales only from customers and ordinary recurring operating expenses. Company B has earnings that include nonrecurring gains and one-time savings on operating expenses. How do earnings from Company A compare to Company B? Company A is riskier than Company B. Company B's earnings are of a higher quality than Company A's earnings. Company A's earnings are of a higher quality than Company B's earnings. Company B has more operating leverage than Company A.

$6,200 $6,200 = $200 + $6,000. A company should not include direct labor costs in the calculation as it was incurred after October 31.

Company A received a $6,000 shipment of inventory designated free on board (FOB) shipping point on November 1. The details for the shipment include the following: •Shipment was in transit on October 31. •The shipping costs were $200. •Company A added $3,000 in direct labor to complete the finished product. How much should be included in Company A's October 31 inventory? $9,200 $6,000 $6,200 $0

$90,703 Unit 5 Test

Company A sells land to Company B for $100,000. Company A takes a note from Company B that is due in two years. Assuming an annual interest rate of 5% is appropriate, the implied annual interest is $100,000 × 0.05 = $5,000, and the present value of the note is $100,000 × 0.90703 = $90,703. Which amount should Company A record for the sale? $100,000 $95,000 $90,703 $90,000

$90,703 Unit 5 Test

Company A sells land to Company B for $100,000. Company A takes a note from Company B that is due in two years. Assuming an annual interest rate of 5% is appropriate, the implied annual interest is $100,000 × 0.05 = $5,000, and the present value of the note is $100,000 × 0.90703 = $90,703. Which amount should Company A record for the sale? $90,000 $90,703 $95,000 $100,000

Cash, Accounts receivable, Inventory, Property plant & equipment Unit 4 Test

In which order would these items appear on a classified balance sheet? Cash, Accounts receivable, Inventory, Property plant & equipment Inventory, Cash, Accounts receivable, Property plant & equipment Cash, Inventory, Accounts receivable, Property plant & equipment Accounts receivable, Cash, Inventory, Property plant & equipment Save for Later

Enabling interested parties to express their views on issues under consideration Unit 2 Test

The Financial Accounting Foundation (FAF) has charged the Financial Accounting Standards Board (FASB) with being "robust, comprehensive, and inclusive." What is part of this demand? Enabling interested parties to express their views on issues under consideration Requiring at least one CPA per state to vote on proposed accounting standards Maintaining fair, orderly, and efficient markets Creating accounting standards that are identical across organizations

$5,000 The face value and present value of the note are the same when the market and stated interest rate are the same.

The face value of a two-year note is $5,000. Both the market and stated interest rates are 5%. What is the present value of this note? $5,000 $4,750 $5,250 $500

COGS = $4,975; ending inventory = $8,225

The following information is available for a company that uses a specific identification inventory system: •October 1: Beginning inventory consisted of 200 units at a cost of $7.00 each. •October 7: 500 units were purchased at a cost of $8.00 each. •October 18: 250 units were sold from the October 7 purchase. •October 22: 600 units were purchased at a cost of $8.50 each. •October 24: 300 units were purchased at a cost of $9.00 each. •October 26: 350 units were sold from the October 22 purchase. What are the cost of goods sold (COGS) and the value of ending inventory for October? COGS = $4,975; ending inventory = $8,225 COGS = $8,275; ending inventory = $4,925 COGS = $4,925; ending inventory = $8,275 COGS = $8,225; ending inventory = $4,975

Predictive value, confirmatory value, and materiality Unit 2 Test

To be useful for decision-making, financial statements must have the fundamental quality of relevance. What are the ingredients for relevance? Predictive value, confirmatory value, and materiality Timeliness, understandability, and neutrality Comparability, accuracy, and completeness Completeness, accuracy, and timeliness

They represent activities in the delivery or production of goods and services. Unit 3 Test

What do revenues and expenses have in common? They represent a snapshot of a firm at a point in time. They represent activities in the delivery or production of goods and services. They both decrease firm value. They both increase firm value.

Predictivity Unit 2 Test

What is an ingredient of the fundamental quality of relevance in regards to accounting information? Completeness Predictivity Understandability Timeliness

To establish and improve financial accounting standards Unit 2 Test

What is the purpose of the Financial Accounting Foundation (FAF)? To oversee the development of operating standards for U.S. companies To provide qualified accounting personnel to the SEC and other agencies To establish and improve financial accounting standards To develop topics for the CPA exam

When the performance obligation has been satisfied Unit 2 Test

When is revenue recognized by the seller/provider? When the period for return or cancellation has expired When the performance obligation has been satisfied When payment for the good or service has been received When the sales order has been placed by the customer

Economic entity Unit 2 Test

Which accounting assumption is applied when a company keeps distinct and separate records of financial activities? Economic entity Going concern Periodicity Monetary unit

Assets and Liabilities Unit 4 Test

Which accounts increase when a company borrows money from a bank? Assets and Liabilities Liabilities and Shareholders' equity Revenues and Liabilities Assets and Shareholders' equity

A decrease in inventory To increase the inventory turnover ratio, net inventory must decrease. The inventory turnover ratio is calculated by taking the cost of goods sold and dividing it by the average inventory.

Which change in an account balance increases the inventory turnover ratio, assuming there is no change to the cost of goods sold? An increase in freight-in A decrease in purchase returns A decrease in inventory An increase in purchases

Materiality Unit 2 Test

Which characteristic describes the fundamental quality of relevance? Comparability Materiality Timeliness Completeness

Financial Accounting Standards Board (FASB) Unit 2 Test

Which entity does the Securities and Exchange Commission (SEC) currently rely on to develop accounting standards? Governmental Accounting Standards Board (GASB) Internal Revenue Service (IRS) Financial Accounting Standards Board (FASB) International Accounting Standards Board (IASB)

Sales revenue less discounts less returns less cost of goods sold Unit 3 Test

Which formula accurately describes the calculation of gross profit as presented on a multiple-step income statement? Sales revenue less cost of goods sold Sales revenue less warranty allowance less cost of goods sold Sales revenue less discounts less returns less cost of goods sold Sales revenue less operating expenses

Neutrality Unit 2 Test

Which ingredient is associated with faithful representation? Relevance Understandability Comparability Neutrality

Completeness Unit 2 Test

Which ingredient supports faithful representation? Completeness Verifiability Comparability Timeliness

Decrease in accounts receivable Unit 4 Test

Which item increases cash flow from operations on the cash flow statement? Purchase of an asset used in operations Disposal of an asset used in operations Decrease in accounts receivable Increase in accounts receivable

Simple majority Four of the 7 members must be in support Unit 2 Test

Which minimum level of support is required before a new Financial Accounting Standards Board (FASB) update can be passed? Three-fourths majority Two-thirds majority Simple majority Unanimous

Securities and Exchange Commission (SEC) Unit 2 Test

Which organization enforces appropriate accounting practices for publicly traded companies? Securities and Exchange Commission (SEC) Committee on Accounting Procedure (CAP) Governmental Accounting Standards Board (GASB) Emerging Issues Task Force (EITF)

Securities and Exchange Commission (SEC) Unit 2 Test

Which organization enforces federal securities laws? Governmental Accounting Standards Board (GASB) Emerging Issues Task Force (EITF) Securities and Exchange Commission (SEC) Internal Revenue Service (IRS)

Study Group on Establishment of Accounting Principles Unit 2 Test

Which organization was formed in hopes of preventing the government from establishing accounting standards? Governmental Accounting Standards Board (GASB) Securities and Exchange Commission (SEC) Emerging Issues Task Force (EITF) Study Group on Establishment of Accounting Principles

It is relevant to decision makers. Unit 2 Test

Which requirement should be in place for an item to be recognized in the main body of financial statements? It is relevant to decision makers. It is measurable with absolute certainty. It is defined as a basic estimate. It is relative and relatable.

The two frameworks have the same qualitative characteristics for reporting. Unit 2 Test

Which statement accurately describes the conceptual frameworks developed by Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB)? The two frameworks have the same qualitative characteristics for reporting. They differ on the measurement principles used for historical cost and fair value. The U.S. dollar will be established as the common unit of currency. They do not have economic entity assumptions as part of the two frameworks.

The SEC is responsible for enforcement of securities-related regulations. Unit 2 Test

Which statement provides a distinction between the Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants (AICPA)? The SEC relies on the International Accounting Standards Board (IASB) to develop accounting standards. The SEC is responsible for enforcement of securities-related regulations. The AICPA is a committee of the Financial Accounting Standards Board (FASB). The AICPA provides oversight to the SEC.

Current cash debt coverage Unit 4 Test

Which term describes a company's ability to pay off its current liabilities in a given year from its operations? Cash debt coverage Current ratio Current cash debt coverage Quick ratio

It enables standard-setters to issue pronouncements that are consistent and useful. Unit 2 Test

Why is a conceptual framework for financial accounting necessary? It provides the complete authoritative guidance related to a particular topic. It enables standard-setters to issue pronouncements that are consistent and useful. It clearly defines quantitative thresholds for assessing materiality. It allows the profession to take additional time solving new and emerging issues.

Debit Salary expense $210,000; Credit Salaries payable $210,000 Unit 3 Test

An aftermarket auto parts manufacturer has 100 salaried employees. Total salaries for the employees are $420,000 per month. Employees are paid twice monthly, on the 20th for the first 15 days of the current month and on the 5th day of the following month for the remainder of the current month. Which related journal entry should be made on November 30? Debit Salaries payable $210,000; Credit Salary expense $210,000 Debit Salary expense $210,000; Credit Salaries payable $210,000 Debit Salary expense $420,000; Credit Salaries payable $420,000 Debit Salaries payable $420,000; Credit Salary expense $420,000

Debit Salary expense $260,000; Credit Salaries payable $260,000 Unit 3 Test

An aftermarket auto parts manufacturer has 100 salaried employees. Total salaries for the employees are $520,000 per month. Employees are paid twice monthly, on the 20th for the first 15 days of the current month and on the 5th day of the following month for the remainder of the current month. Which related journal entry should be made on September 30? Debit Salary expense $520,000; Credit Salaries payable $520,000 Debit Salary expense $260,000; Credit Salaries payable $260,000 Debit Salaries payable $260,000; Credit Salary expense $260,000 Debit Salaries payable $520,000; Credit Salary expense $520,000

$44,518 Unit 5 Test

An employee will receive a $10,000 bonus at the end of each year for the next five years. Assuming an annual interest rate of 4% is appropriate, the present value of an ordinary annuity is 4.4518 × $10,000 = $44,518, and the present value of an annuity due is 4.6299 × $10,000 = $46,299. What is the discounted present value of the bonus payments? $46,299 $50,000 $44,518 $52,000

$1,409,394 Unit 5 Test

An individual recently won a lottery and has the opportunity to receive $100,000 per year at the end of the year for the next 25 years. Assuming an annual interest rate of 5% is appropriate, the present value of 1 is 0.29530 × $100,000 = $29,530, the present value of an ordinary annuity is 14.09394 × $100,000 = $1,409,394, and the present value of an annuity due is 14.79864 × $100,000 = $1,479,864. What is the fair value of the lottery payments, according to the Financial Accounting Standards Board (FASB)? $1,409,394 $738,250 $2,500,000 $1,479,864

1% Unit 5 Test

An investment of $1 for 12 years at 12% annual interest is compounded monthly. What is the interest rate per compounding period? 6% 12% 1% 3%

2% Unit 5 Test

An investment of $1 for 8 years at 8% annual interest is compounded quarterly. What is the interest rate per compounding period? 4% 2% 8% 0.67%

Debit bad debt expense; credit accounts receivable When using the direct write-off method, bad debit expense is debited and accounts receivable is credited.

As of December 31, a company has an uncollectible balance of $10,000. The accountant wants to use the direct write-off method to write this amount off.Which journal entry should be recorded? Debit accounts receivable; credit allowance for doubtful accounts Debit bad debt expense; credit accounts receivable Debit accounts receivable; credit bad debt expense Debit allowance for doubtful accounts; credit accounts receivable

Debit notes receivable for $7,000; credit revenue for $5,557; credit discount on notes receivable for $1,443 The note is recorded at face value, revenue is recorded at the net present value using 8% for 3 years ($5,556.81 = $7,000 x 0.79383), and the discount on notes receivable is the difference between notes receivable and revenue ($1,443 = $7,000 - $5,557).

A company received a $7,000, noninterest-bearing note for the sale of inventory. The market rate at the time of the sale is of 8%. The note is due in full at the end of three years. Assuming an annual interest rate of 8% for three years is appropriate, the present value of the principal is $7,000 x 0.79383 = $5,557. Assuming an annual interest rate of 3% for eight years is appropriate, the present value of the principal is $7,000 x 0.78941 = $5,527. Which journal entry is recorded when the sale occurs? Debit notes receivable for $5,526; debit discount on notes receivable for $1,474; credit revenue for $7,000 Debit notes receivable for $7,000; credit revenue for $5,526; credit discount on notes receivable for $1,474 Debit notes receivable for $7,000; credit revenue for $5,557; credit discount on notes receivable for $1,443 Debit notes receivable for $5,557; debit discount on notes receivable for $1,443; credit revenue for $7,000

Credit discount on notes receivable DR Note Receivable $20K CR Discount $3500 CR Cash $16500

A company receives a three-year, $20,000 zero-interest-bearing note that has a present value of $16,500. Which entry will this company record to account for the $3,500 difference? Credit premium on notes receivable Credit discount on notes receivable Debit discount on notes receivable Debit premium on notes receivable

($481,000) (700,000)+180,000-60,000+39,000-40,000+100,000 Unit 4 Test

A company reports a loss of $700,000 and depreciation of $180,000 for Year 2. Between Year 1 and Year 2, accounts receivable increased by $60,000 and inventory decreased by $39,000. Accounts payable decreased by $40,000. The company issued 1,000 shares of stock with par value of $100 and sold them at par (assume no fees). What is the company's net change in cash as reported on its cash flow statement? ($361,000) ($381,000) ($481,000) ($661,000)

$35,000 Unit 4 Test

A company reports the following: --Capital stock $1,000,000 --Accounts payable $6,000 --Accrued wages $14,000 --Income taxes payable $5,000 --Unearned revenue $10,000 --Bonds payable $1,000,000 --Retained earnings $1,015,000 What is the total of the company's current liabilities? $35,000 $25,000 $1,050,000 $1,035,000

$49,000 Unit 4 Test

A company reports the following: Cash $10,000 Restricted cash $12,000 Prepaid expenses $8,000 Plant and equipment $72,000 Inventory $9,000 Accounts payable $20,000 Trading securities $10,000 Which amount shows the company's total current assets? $27,000 $39,000 $49,000 $59,000

$140,000 Unit 4 Test

A company reports the following: Cash: $40,000 Restricted cash: $17,000 Prepaid expenses: $15,000 Plant & equipment: $94,000 Inventory: $8,000 Accounts payable: $26,000 Trading securities: $60,000 What is the amount of the company's total current assets? $132,000 $72,000 $140,000 $80,000

$7,843 Unit 5 Test

A company requires $8,000 cash in a savings account earning 2% interest at the end of the year. Assuming an annual interest rate of 2% is appropriate, the implied annual interest is $8,000 × 0.02 = $160, and the present value of the savings is $8,000 × 0.98039 = $7,843. Which amount must be deposited in the savings account at the beginning of the year? $8,160 $7,840 $7,843 $8,000

$7,843 Unit 5 Test

A company requires $8,000 cash in a savings account earning 2% interest at the end of the year. Assuming an annual interest rate of 2% is appropriate, the implied annual interest is $8,000 × 0.02 = $160, and the present value of the savings is $8,000 × 0.98039 = $7,843. Which amount must be deposited in the savings account at the beginning of the year? $8,160 $8,000 $7,843 $7,840

Cash flow from financing $30,000 Unit 4 Test

A company sold one of its delivery trucks for $10,000. The truck was fully depreciated and had a carrying value of zero. The company purchased a new truck for $40,000 using $10,000 in cash and $30,000 of debt. What is the impact of these transactions on the cash flow statement? Cash flow from investing ($40,000); Cash flow from financing $40,000 Cash flow from operations $10,000; Cash flow from financing $40,000 Cash flow from financing $30,000 Cash flow from operations $10,000; Cash flow from investing ($40,000); Cash flow from financing $30,000

Cost of goods sold will be understated. If ending inventory is overstated, the cost of goods sold will be understated, resulting in an overstatement of net income.

A company that is using the periodic inventory system correctly records purchases but double counts some items in ending inventory. What will be the effect on the financial statements at the end of this period? Accounts payable will be understated. Cost of goods sold will be understated. Current ratio will be understated. Net income will be understated.

Cost of goods sold will be overstated.

A company that used the periodic inventory system overstated its beginning inventory but correctly stated its ending inventory. What will be the effect of this error on the financial statements at the end of the period? Working capital will be overstated. Cost of goods sold will be overstated. Net income will be overstated. Retained earnings will be correct.

Understatement of working capital and current ratio Underestimating ending inventory understates the working capital reported and the current ratio.

A company underestimates its ending inventory for a year. Which effect will this have on the company's working capital and current ratio? Overstatement of working capital and understatement of current ratio Understatement of working capital and current ratio Overstatement of working capital and current ratio Understatement of working capital and overstatement of current ratio

COGS = $5,250; ending inventory = $7,950 A total of 600 units were sold (250 + 350) so COGS is $5,250 = (300 × $9) + (300 × $8.50). There are a total of $1,000 in ending inventory (200 + 500 - 250 + 600 + 300 - 350) so ending inventory is $7,950 = (300 × $8.5) + (500 × $8) + (200 × $7). The LIFO method of inventory valuation assumes that the last items purchased are used to value the items sold and the earliest items purchased are used to value ending inventory.

A company uses the periodic inventory system and the last-in, first-out (LIFO) cost flow assumption method to account for inventory. The following information is given: COGS = $8,600; ending inventory = $4,600 COGS = $5,250; ending inventory = $7,950 COGS = $4,600; ending inventory = $8,600 COGS = $7,950; ending inventory = $5,250

Debit Loss (flood) $70,000 Unit 3 Test

Bullzai Inc.'s office building was flooded during a rare weather event. Carpeting costs of $50,000 and cleaning costs of $20,000 were incurred. The firm has a $100,000 insurance deductible. How should the uninsured flood costs be reported on the income statement? Debit Loss (flood) $70,000 Credit Building improvements (carpet) $50,000; Debit Cleaning expense $20,000 Debit Carpet expense $50,000; Debit Cleaning expense $20,000 Debit Extraordinary item $70,000