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53 terms

Chapter 2 accounting

STUDY
PLAY
The accounting equation can be stated as
D. A - L - OE = 0
Examples of external transactions include all of the following except:
C. Depreciating equipment
Examples of internal transactions include all of the following except:
D.Paying wages to company employees
XYZ Corporation receives $100000 from investors for issuing them shares of its stock. XYZ's journal entry to record this transaction would include a:
C. Credit to capital stock
Incurring an expense for advertising on account would be recorded by
C. Debiting an expense
A sale on account would be recorded:
D. Debiting assets
Mary Parker Co. invested $15000 in ABC Corporation and received capital stock in exchange. Mary parker Co.'s journal entry to record this transaction would include a
A. Debit to investments
Hughes Aircraft sold a four-passenger airplane for $380000, receiving a $50000 down payment and a 12% note for the balance. the journal entry to record this sale would include a
C. Debit to note receivable
Somerset Leasing received $12000 for 24 months rent in advance. How should Somerset record this transaction?
B. Option B.
Davis Hardware Company uses a perpetual inventory system. How should Davis record the sale of merchandise, costing $620, and sold for $960 on account?
B. Option B
Ace Bonding Company purchased merchandise inventory on account. The inventory costs $2000 and is expected to sell for $3000. How should Ace record the purchase?
A. Option A.
Making insurance payments in advance is an example of
D. A prepaid expense transaction
Recording revenue earned from a customer, but not yet collected, is an example of:
D. An accrued receivable transaction
When a magazine sells subscriptions to customers, it is an example of
D. unearned revenue transaction
On Dec 31, 2011, Coolwear, Inc. had balances in its accounts receivable and allowance for uncollectible accounts of $48400 and $0, respectively. No receivables were written off during the year. At the end of 2011, Coolwear estimated that $2100 in receivables would not be collected. Bad debt expense for 2011 would be:
D. 2100
Adjusting entries are primarily needed for
B. Accrual accounting
Prepayments occur when
A. Cash flow precedes expense recognition
Accruals occur when cash flows
B. Occur after revenue or expense recognition
On Dec 31, 2011, the end of Larry's Used Cars first year of operations, the accounts receivable was 453,600. The company estimates that 41,200 of the year-end receivables will not be collected. Accounts receivable in the 2011 balance sheet will be valued at:
C. 52400
Cal Farms reported supplies expense of 2000000 this year. the supplies account decreased by 200000 during the year to an ending balance of 400000. What was the cost of supplies that Cal Farms purchased during the year.
B. 1800000
The adjusting entry required when amounts previously recorded as unearned revenues are earned includes:
A. A debit to liability
When a tenant makes an end-of-period adjusting entry credit to the "Prepaid rent" account
B. (S)he usually debits an expense account
When a business makes an end-of-period adjusting entry with a debit to supplies expense, the usual credit entry is made to
B. Supplies
The adjusting entry required to record accrued expenses includes
D. A credit to liability
Carolina Mills purchased $270000 in supplies this year. The supplies account increased by $10000 during the year to an ending balance of $66000. What was supplies expense for Carolina Mills during the year
C. 260000
Yummy Foods purchased a two year fire and extended coverage insurance policy on august 1, 2011 and charged the $4200 premium to Insurance expense. At its December 31, 2011, year-end, Yummy Foods would record which of the following adjusting entries?
D. Option D
the employees of Neath Clothes work Monday through friday. Every other Friday the company issues payroll checks totaling $32000. The current pay period ends on Friday, July 3. Neat Clothes is now preparing quarterly financial statements for the three months ended June 30. What is the adjusting entry to record accrued salaries at the end of June?
D. Option D
Mama's Pizza Shoppe borrowed $8000 at 9% interest on May 1, 2011, with principal and interest due on Oct 31, 2012. The company's fiscal year ends June 30,2011. What adjusting entry would the company record on June 30,2011?
C. Option C
On September 15, 2011, Oliver's Mortuary received a $6000, nine-moth note bearing interest at an annual rate of 10% from the estate of Jay Hendrix for services rendered. Oliver's has a December 31 year-end. What adjusting entry would the comapny record on Dec, 31, 2011?
A. Option A
In its first year of operations Acme Corp. had income before tax of $400000. Acme made income tax payments totaling $150000 during the year and has an income tax rate of 40. what would be the balance in income tax payable at the end of the year?
C. 10000 credit
Eve's Apples opened business on January 1, 2011, and paid for two insurance policies effective that date. The liability policy was $36000 for eighteen months, and the crop damage policy was 12000 for a two year term. What was the balance in Eve's prepaid insurance as of Dec 31, 2011
B. 18000
Fink Insurance collected premiums of 18000000 from its customers during the current year. The adjusted balance in the unearned premiums account increased from 6 million to 8 million dollars during the year. What was Fink's revenue from earned insurance premiums for the current year?
B. 16000000
On November 1, 2011, tim's toys borrows 30000000 at 9% to finance the holiday sales season. The note is for a six month term and both principal and interest are payable at maturity. What should be the balance of interest payable for the loan as of Dec 31, 2011
C. 450000
A future economic benefit owned or controlled by an entity is
B an asset
Cost of goods sold is
C. an expense account
The balance in retained earnings at the end of the year is determined by retained earnings at the beginning of the year
C. Plus net income minus dividends
In its first year of operations Best Corp had income before tax of 500000. Best made income tax payments totaling 210000 during the year and has an income tax rate of 40%. What was Best's net income for the year?
C. 300000
Dave's Duds reported cost of goods sold of 200000 during the year to an ending balance of 400000. what was the cost of merchandise that Dave purchased during the year?
C. 2200000
Permanent accounts would not include
A. Interest expense
Permanent accounts would not include
A. Cost of goods sold
The purpose of closing entries is to transfer
B. Balances in temporary accounts to permanent accounts
Temporary accounts would not include
A. Salaries payable
When converting an income statement from a cash basis to an accrual basis, expenses:
D. May exceed or be less than cash payments to suppliers
When the amount of revenue collected in advance decreases during an accounting period
A. Accrual-basis revenues exceed cash collections from customers
When converting an income statement from a cash basis to an accrual basis, which of the following is incorrect
B. An adjustment for bad debts increases the net income
Molly's Auto Detailers maintains its records on the cash basis. During 2011, Molly's collected 72000 from customers and paid 21000 in expenses. Depreciation expense of 5000 would have been recorded on the accrual basis. Over the course of the year, accounts receivable increase 4000, prepaid expenses decreased 2000, and accrued liabilities decreased 1000. Molly's accrual basis net income would be
C. 49000
Pat's Custom Tuxedo shop maintains its records on the cash basis. During this past year Pat's collected 42000 in tailoring fees and paid 14000 in expenses. Depreciation expense totaled 2000. Account receivable increased 1500, supplies increased 4000, and accrued liabilities increased 2500. Pat's accrual basis net income would be
D. 29000
The Hamada Company sales for 2011 totaled 150000 and purchases totaled 95000. Selected Jan 1, 2011, balances were: accounts receivable, $16,000; inventory, $15,000; and accounts payable, $13,000. Net cash flows from these activities were:
C 58000
When the amount of interest receivable decreases during an accounting period:
C. Accrual-basis interest revenues are less than collections from borrowers
When converting an income statement from a cash basis to an accrual basis, cash received for services:
B. May exceed or be less than service revenue
Compared to the accrual basis of accounting the cash basis of accounting produces a higher amount of income by the net decrease during the accounting period of
A. Option A
On June 1, Royal Corp began operating a service company with an initial cash investment by shareholders of 2000000. The company provided 6400000 of services in June and received full payment in July. Royal also incurred expenses of 3000000 in June that were paid in August. During June, Royal paid its shareholders cash dividends of 1000000. what was the company's income before income taxes for the two months ended July 31 under the following methods of accounting
C. Option C.
When Castle Corporation pays insurance premiums, the transaction is recorded as a debit to prepaid insurance. Additional information for the year ended is as follows...what was the total amount cash paid by Castle for insurance premiums during the year?
C. 227500