Chapter 1

*ABE1-8
Your answer is correct. Use the basic accounting equation to answer these questions. (a) The liabilities of Daley Company are $80,063 and the stockholders' equity is $205,645. What is the amount of Daley Company's total assets? (b) The total assets of Laven Company are $172,724 and its stockholders' equity is $93,034. What is the amount of its total liabilities? (c) The total assets of Peterman Co. are $678,400 and its liabilities are equal to one-fourth of its total assets. What is the amount of Peterman Co.'s stockholders' equity? Assets Liabilities Stockholders' Equity = + (a) $ 285708 $ 80063 $ 205645 (b) $ 172724 $ 79690 $ 93034 (c) $ 678400 $ 169600 $ 508800 Question Attempts: Unlimited

AP1-3A (a) Your answer is correct.

On June 1 Beardsley Service Company was started with an investment of $27,024 cash. Here are the assets and liabilities of the company on June 30, and the revenues and expenses for the month of June, its first month of operations. Cash Accounts receivable Revenue Supplies Advertising expense Equipment $5,424 4,408 7,814 2,389 400 29,814 Notes payable Accounts payable Supplies expense Gas & oil expense Utilities expense Wage expense $13,638 908 1,021 620 280 2,214

In June, the company issued no additional common stock, but paid dividends of $2,814. Complete an income statement and a retained earnings statement for the month of June and a balance sheet at June 30, 2012. (List expenses from largest to smallest amount, e.g. 10, 5, 2. List assets in order of liquidity and liabilities from largest to smallest amount, e.g. 10, 5, 2 with notes payable first.) BEARDSLEY SERVICE CO. Income Statement For the Month Ended June 30, 2012 Revenues Revenue

$

7814

1

Expenses
Wage expense Supplies expense Gas & oil expense Advertising expense Utilities expense

$

2214 1021 620 400 280 4535

Total expenses Net income BEARDSLEY SERVICE CO. Retained Earnings Statement For the Month Ended June 30, 2012
Retained earnings, June 1

$

3279

$

0 3279 3279

Add:

Net income

Less:

Dividends

2814

Retained earnings, June 30

$ BEARDSLEY SERVICE CO. Balance Sheet June 30, 2012 Assets

465

Cash Accounts receivable Supplies Equipment

$

5424 4408 2389 29814

Total assets Liabilities and Stockholders' Equity $
13638 908

$

42035

Liabilities Notes payable
Accounts payable

Total liabilities Stockholders' equity
Common stock Retained earnings 27024 465

$

14546

27489

Total liabilities and stockholders' equity Click here if you would like to Show Work for this question

$

42035

2

Question Attempts: Unlimited

Copyright © 2000-2012 by John Wiley & Sons, Inc. or related companies. All rights reserved.

3

Chapter 2

AP2-3A Your answer is correct.

You are provided with the following information for Merrell Enterprises, effective as of its April 30, 2012, year-end. Accounts payable $925 Accounts receivable 901 Building, net of accumulated depreciation 1,537 Cash 1,471 Common stock 1,302 Cost of goods sold 1,081 Current portion of long-term debt 541 Depreciation expense 335 Dividends paid during the year 416 Equipment, net of accumulated depreciation 1,421 Income tax expense 165 Income taxes payable 226 Interest expense 491 Inventories 1,058 Land 2,301 Long-term debt 3,701 Prepaid expenses 103 Retained earnings, beginning 1,600 Revenues 4,801 Selling expenses 210 Short-term investments 1,310 Wages expense 609 Wages payable 313 (a) Complete income statement and a retained earnings statement for Merrell Enterprises for the year ended April 30, 2012. (List expenses from largest to smallest amounts, e.g. 10, 5, 1.) MERRELL ENTERPRISES Income Statement For the Year Ended April 30, 2012 Revenues Revenues Expenses Cost of goods sold
Wages expense Interest expense Depreciation expense Selling expenses Income tax expense

$ $
1081 609 491 335 210 165

4801

Total expenses

2891

4

Net income MERRELL ENTERPRISES Retained Earnings Statement
For the Year Ended April 30, 2012 Retained earnings, May 1

$

1910

$

1600 1910 3510

Add:

Net income

Less:

Dividends

416

(b)

3094 $ Complete the classified balance sheet for Merrell Enterprises as of April 30, 2012. (List assets in order of liquidity and liabilities from largest to smallest amount e.g. 10, 5, 1.) MERRELL ENTERPRISES Balance Sheet April 30, 2012 Retained earnings, April 30

Current assets Cash
Short-term investments Accounts receivable Inventories Prepaid expenses

Assets $
1471 1310 901 1058 103

Total current assets Property, plant and equipment Land
Building, net of accum. depr. Equipment, net of accum. depr. 2301 1537 1421

$

4843

Total property, plant and equipment Total assets Liabilities and Stockholders' Equity $
925 541 313 226

5259

$

10102

Current liabilities Accounts payable

Current portion of long-term debt Wages payable Income taxes payable

Total current liabilities
Long-term debt

$

2005 3701

5

Total liabilities Stockholders' equity
Common stock Retained earnings 1302 3094

5706

Total stockholders' equity Total liabilities and stockholders' equity Click here if you would like to Show Work for this question $

4396 10102

6

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View Attempt 1 of 1
Title: Started: Submitted: > Quiz 1 August 22, 2012 8:41 AM August 22, 2012 9:22 AM

Time spent: 00:41:19 Total score: 70/100 = 70% Total score adjusted by 0.0 Maximum possible score: 100

1.
The best definition of assets is

Student Response A. resources belonging to a company having future benefit to the company. B. collections of resources belonging to the company and the claims on these resourcese. C. cash owned by the company. D. owners' investment in the business. Score: 10/10

2.
Which of the following is not an expense?

7

Student Response A. Rent Expense B. Depreciation Expense C. Prepaid Expense D. Salary Expense Score: 10/10

3.
Resources owned by a business are referred to as

Student Response A. stockholders' equity. B. liabilities. C. revenues. D. assets. Score: 10/10

4.
A customer payment

Student Response

8

A. decreases expenses. B. decreases stockholders' equity. C. increases expenses. D. increases assets. Score: 10/10

5.
A net loss results when

Student Response A. Expenses>Liabilities B. Expenses>Assets C. Expenses>Revenues D. Liabilities>Assets Score: 10/10

6.
If the retained earnings account increases from the beginning of the year to the end of the year, then

Student Response

9

A. additional investments are less than net losses. B. net income is less than dividends. C. net income is greater than dividends. D. a net loss is less than dividends. Score: 10/10

7.
An income statement shows

Student Response A. revenues, expenses, and net income. B. revenues, liabilities, and stockholders' equity. C. expenses, dividends, and stockholders' equity. D. assets, liabilities, and stockholders' equity. Score: 10/10

8.
If assets increase, then which of the following could have happened?

Student Response A. stockholders' equity decrease

10

B. expenses increase C. liabilities increase D. liabilities decrease Score: 0/10

9.
If total liabilities increased by $25,000 and stockholders' equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?

Student Response A. $20,000 decrease B. $20,000 increase C. $30,000 increase D. $25,000 increase Score: 0/10

10.
If total liabilities decreased by $15,000 and stockholders' equity decreased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?

Student Response

11

A. $10,000 decrease B. $20,000 decrease C. $10,000 decrease D. $20,000 increase Score: 0/10

12

Title: Started: Submitted:

> Quiz 2 August 23, 2012 12:21 PM August 23, 2012 1:21 PM

Time spent: 01:00:04 Total score: 60/100 = 60% Total score adjusted by 0.0 Maximum possible score: 100

1.
A current asset is

Student Response A. expected to be converted to cash or used in the business within a relatively short period of time. B. an asset which is currently being used to produce a product or service. C. usually found as a separate classification in the income statement. D. the last asset purchased by a business. Score: 10/10

2.
Accounts payable would be classified as a

Student Response A. current asset. B. current liability.

13

C. plant, property, & equipment. D. long-term liability. Score: 10/10

3.
Able Auto Supplies has the following accounts and their balances: Accounts Payable $65,000 Accounts Receivable $60,000 Accumulated Depreciation $20,000 Building $100,000 Cash $50,000 Common Stock $120,000 Inventory $70,000 Land $95,000 Land held for future use $80,000 Mortgage Payable $90,000 Prepaid Insurance $30,000 Retained Earnings $250,000 Salaries Payable $10,000 Trademark $70,000 The total dollar amount of assets to be classified as current assets is

Student Response A. $210,000. B. $290,000. C. $140,000. D. $150,000.

14

Score:

10/10

4.
Acme Auto Supplies listed the following accounts on their December 31, 2007 Cash $60,000 Prepaid Insurance $40,000 Accounts Receivable $50,000 Inventory $70,000 Land held for investment $80,000 Land $95,000 Building $100,000 Less: Accumulated Depreciation <$30,000> Trademark $70,000 Accounts Payable $65,000 Salaries Payable $10,000 Mortgage Payable $90,000 Common Stock $120,000 Retained Earnings $250,000 The total dollar amount of assets to be classified as property, plant, and equipment is

Student Response A. $195,000. B. $165.000. C. $315,000. D. $245,000. Score: 0/10

15

5.
Acme Auto Supplies listed the following accounts on their December 31, 2007 Cash $60,000 Prepaid Insurance $40,000 Accounts Receivable $50,000 Inventory $70,000 Land held for investment $80,000 Land $95,000 Building $100,000 Less: Accumulated Depreciation <$30,000> Trademark $70,000 Accounts Payable $65,000 Salaries Payable $10,000 Mortgage Payable $90,000 Common Stock $120,000 Retained Earnings $250,000 The total dollar amount of asssets to be classified as investments is

Student Response A. $0. B. $180,000. C. $150,000. D. $80,000. Score: 0/10

6.
Acme Auto Supplies listed the following accounts on their December 31, 2007 Cash $60,000 Prepaid Insurance $40,000 16

Accounts Receivable $50,000 Inventory $70,000 Land held for investment $80,000 Land $95,000 Building $100,000 Less: Accumulated Depreciation <$30,000> Trademark $70,000 Accounts Payable $65,000 Salaries Payable $10,000 Mortgage Payable $90,000 Common Stock $120,000 Retained Earnings $250,000 The total amount of working capital is

Student Response A. $150,000. B. $155,000. C. $60,000. D. $145,000. Score: 0/10

7.
Acme Auto Supplies listed the following accounts on their December 31, 2007 Cash $60,000 Prepaid Insurance $40,000 Accounts Receivable $50,000 Inventory $70,000 Land held for investment $80,000 Land $95,000 Building $100,000 17

Less: Accumulated Depreciation <$30,000> $70,000 Accounts Payable $65,000 Salaries Payable $10,000 Mortgage Payable $90,000 Common Stock $120,000 Retained Earnings $250,000 The current ratio is

Student Response A. 1.86:1. B. 3.38:1. C. 2.93:1. D. 2.00:1. Score: 0/10

8.
Based on the following data, what is the debt to total assets ratio (to the nearest percent)100%?<br> Accounts Payable $31,000<br> Accounts Receivable $57,000<br> Cash $15,000<br> Intangible Assets $50,000<br> Inventory $69,000<br> Long-Term Investments $80,000<br> Long-Term Liabilities $100,000<br> Short-Term Investments $40,000<br> Notes Payable $28,000<br> Plant Assets $670,000<br> Prepaid Expenses $1,000

18

Student Response A. 51% B. 54% C. 16% D. 100% Score: 10/10

9.
Current assets $7,000 Current liabilities $4,000 Average assets $40,000 Total assets $30,000 Net income $12,000 Stockholders' equity $27,000 Total liabilities $9,000

Average common shares outstanding was 10,000 What is the debt to total assets?

Student Response A. 30% B. 75% C. 22.5% D. 13%

19

Score:

10/10

10.
An example of a liquidity ratio would be

Student Response A. earnings per share. B. current ratio. C. debt to total assets ratio. D. times interest earned ratio. Score: 10/10

Chapter 3
AP3-5A Towne Architects incorporated as licensed architects on April 1, 2012. During the first month of the operation of the business, these events and transactions occurred: April 1 1 2 3 10 11 20 30 30 Stockholders invested $20,283 cash in exchange for common stock of the corporation. Hired a secretary-receptionist at a salary of $507 per week, payable monthly. Paid office rent for the month $1,217. Purchased architectural supplies on account from Spring Green Company $1,352. Completed blueprints on a carport and billed client $2,028 for services. Received $676 cash advance from J. Madison to design a new home. Received $3,110 cash for services completed and delivered to M. Svetlana. Paid secretary-receptionist for the month $2,028. Paid $406 to Spring Green Company for accounts payable due.

20

Your answer is correct. Journalize the transactions. (If no entry is required type No entry for the account and 0 for the amount.) Date Account/Description Debit Credit April 1
Cash Common stock 20283 20283 0 0 1217 1217 1352 1352 2028 2028 676 Unearned Revenue 676 3110 Service revenue 3110 2028 2028 406 406

April 1

No entry No entry

April 2

Rent expense Cash

April 3

Supplies Accounts payable

April 10

Accounts receivable Service revenue

April 11

Cash

April 20

Cash

April 30

Salaries expense Cash

April 30

Accounts payable Cash

Your answer is correct.

Complete the following trial balance. (Hint: Post the above transactions to the ledger T-accounts and use the balances to complete the trial balance.) (If answer is zero please enter 0, do not leave any fields blank.) TOWNE ARCHITECTS INC. Trial Balance April 30, 2012

21

Debit Cash Accounts receivable Supplies Accounts payable Unearned Revenue Common stock Service revenue Salaries Expense Rent expense $ $
20418 2028 1352 0 0 0 0 2028 1217 27043

Credit $
0 0 0 946 676 20283 5138 0 0

$

27043

Click here if you would like to Show Work for this question

Question Attempts: Unlimited

Copyright © 2000-2012 by John Wiley & Sons, Inc. or related companies. All rights reserved.

22

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View Attempt 1 of 1
Title: Started: Submitted: >Quiz 3 August 28, 2012 10:56 AM August 28, 2012 11:40 AM

Time spent: 00:43:41 Total score: 80/100 = 80% Total score adjusted by 0.0 Maximum possible score: 100

1.
The purchase of an asset on credit

Student Response A. increases assets and liabilities. B. decreases assets and increases liabilities. C. increases assets and stockholders' equity. D. leaves total assets unchanged. Score: 10/10

2.
When collection is made on Accounts Receivable

Student Response

23

A. stockholders' equity will increase. B. total assets will remain the same. C. total assets will increase. D. total assets will decrease. Score: 0/10

3.
A revenue generally

Student Response A. increase assets and liabilities. B. increases assets and decreases stockholders' equity. C. increases assets and stockholders' equity. D. leaves total assets unchanged. Score: 10/10

4.
A payment of a portion of accounts payable will

Student Response A. increase liabilities.

24

B. decrease net income. C. not affect stockholders' equity. D. not affect total assets. Score: 10/10

5.
Which of the following describes the classification and normal balance of the retained earnings account?

Student Response A. Expense, debit B. Revenue, credit C. Stockholders' Equity, credit D. Asset, debit Score: 10/10

6.
Which of the following describes the classification and normal balance of the unearned revenue account?

Student Response A. Expense, debit

25

B. Revenue, credit C. Asset, debit D. Liability, credit Score: 10/10

7.
Which accounts normally have debit balances?

Student Response A. Assets, expenses, and dividends. B. Assets, expenses, and retained earnings. C. Assets, liabilities, and dividends. D. Assets, expenses, and revenues. Score: 10/10

8.
Which of the following correctly identifies normal balances of accounts?

Student Response A. Assets, debit; Liabilities, credit; Common Stock, credit; Revenues, credit; Expenses, credit B. Assets, debit; Liabilities, credit; Common Stock, credit; Revenues, debit; Expenses, credit

26

C. Assets, credit; Liabilities, debit; Common Stock, debit; Revenues, credit; Expenses, debit D. Assets, debit; Liabilities, credit; Common Stock, credit; Revenues, credit; Expenses, debit Score: 0/10

9.
When a company performs a service but has not yet received payment, it

Student Response A. makes no entry until cash is received. B. debits service revenues and credits accounts receivable. C. debits service revenues and credits accounts payable. D. debits accounts receivable and credits service revenue. Score: 10/10

10.
Which account below is not a subdivision of stockholders' equity?

Student Response A. Liabilities B. Expenses C. Revenues

27

D. Dividends Score: 10/10

Chapter 4

AP4-8A Dana La Fontsee opened Pro Window Washing Inc. on July 1, 2012. During July the following transactions were completed.

July July July July July July July July July July July

1 1 3 5 12 18 20 21 25 31 31

Issued 11,979 shares of common stock for $11,979 cash. Purchased used truck for $9,979, paying $2,046 cash and the balance on account. Purchased cleaning supplies for $908 on account. Paid $1,881 cash on 1-year insurance policy effective July 1. Billed customers $3,281 for cleaning services. Paid $1,263 cash on amount owed on truck and $539 on amount owed on cleaning supplies. Paid $2,139 cash for employee salaries. Collected $1,556 cash from customers billed on July 12. Billed customers $2,631 for cleaning services. Paid $377 for gas and oil used in the truck during month. Declared and paid a $634 cash dividend.

Your answer is correct.

Journalize the July transactions. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.) Date July 1 Account/Description
Cash Common Stock 11979 11979

Debit

Credit

(To record the issuance of stock) July 1
Equipment Accounts Payable Cash 9979 7933 2046

(To record the purchase of a truck) July 3
Cleaning Supplies 908

28

Accounts Payable

908 1881 1881 3281 3281 1802 1802 2139 2139 1556

July 5

Prepaid Insurance Cash

July 12

Accounts Receivable Service Revenue

July 18

Accounts Payable Cash

July 20

Salaries Expense Cash

July 21

Cash Accounts Receivable

1556 2631 2631 377 377

July 25

Accounts Receivable Service Revenue

July 31

Gas & Oil Expense Cash

(Paid for gas and oil) July 31
Dividends Cash 634 634

(Declared and paid a dividend)

Your answer is correct.

Journalize the following adjustments. (Round answers to 0 decimal places, e.g. 2,520.) 1. Services provided but unbilled and uncollected at July 31 were $1,805. 2. Depreciation on equipment for the month was $254. 3. One-twelfth of the insurance expired. 4. An inventory count shows $360 of cleaning supplies on hand at July 31. 5. Accrued but unpaid employee salaries were $406. Date Account/Description Debit 1. July Accounts Receivable 1805. 31
Service Revenue 1805.

Credit

29

2. July 31

Depreciation Expense Accumulated Depreciation

254. 254. 156. 156. 548. 548. 406. 406.

3. July 31

Insurance Expense Prepaid Insurance

4. July 31

Cleaning Supplies Expense Cleaning Supplies

5. July 31

Salaries Expense Salaries Payable

Your answer is correct.

Post the July transactions to the ledger accounts. (Use T accounts.) Post adjusting entries to the T accounts. Post closing entries and complete the closing process.(If answer is zero, please enter 0, do not leave any fields blank.) Cash 7/1 7/21
11979 1556

Accounts Payable
2046 1881 1802 2139 377 634

7/1 7/5 7/18 7/20 7/31 7/31

7/18

1802

7/1 7/3 7/31 Bal.

7933 908 7039

Salaries Payable 7/31 7/31 Bal. Common Stock
406 406

7/31 Bal.

4656

Accounts Receivable 7/12 7/25 7/31 7/31 Bal.
3281 2631 1805 6161

7/21

1556

7/1 7/31 Bal.

11979 11979

Retained Earnings 7/31
634

7/31

3837

30

Cleaning Supplies 7/3 7/31 Bal.
908 360

7/31 Bal.
548

3203

7/31

Dividends 7/31 7/31 Bal
156 634 0

7/31

634

Prepaid Insurance 7/5
1881

7/31

Income Summary

7/31 Bal.

1725

MUST BE FIGURED OUT BY DOING THE INCOME STATEMENT BELOW 1ST! 7/31 7/31 Equipment

1) 3880 2) 3837

7/31 7/31 Bal.

7717

0

7/1 7/31 Bal.

9979 9979

Service Revenue 7/31
7717

7/12 7/25 7/31 7/31 Bal.

3281 2631 1805 0

Accumulated Depreciation - Equipment 7/31 7/31 Bal. Gas and Oil Expense 7/31 7/31 Bal.
377 0 254 254

Insurance Expense
377

7/31

7/31 7/31 Bal.

156 0

7/31

156

Cleaning Supplies Expense 7/31 7/31 Bal.
548 0

Salaries Expense 7/20 7/31 7/31 Bal.
2139 406 0

7/31

548

7/31

2545

Depreciation Expense 7/31 7/31 Bal.
254 0

7/31

254

31

Your answer is correct.

Complete the Trial Balance and Adjusted Trial Balance at July 31. (If an answer is zero, please enter 0, do not leave any fields blank.) PRO WINDOW WASHING INC. Trial Balance July 31, 2012 Before Adjustment Debit Credit Cash Accounts Receivable Cleaning Supplies Prepaid Insurance Equipment Acc. Depr. Equipment Accounts Payable Salaries Payable Common Stock Dividends Service Revenue Salaries Expense Gas & Oil Expense Depreciation Expense Insurance Expense Cleaning Supplies Expense $ $
4656 4356 908 1881 9979 0 0 0 0 634 0 2139 377 0 0 0 24930

After Adjustment Debit
4656 6161 360 1725 9979 0 0 0 0 634 0 2545 377 254 156 548

Credit

$

0 0 0 0 0 0 7039 0 11979 0 5912 0 0 0 0 0

$

$

0 0 0 0 0 254 7039 406 11979 0 7717 0 0 0 0 0

$

24930

$

27395

$

27395

Your answer is correct.

Complete the income statement and a retained earnings statement for July and a classified balance sheet at July 31. (List expenses from largest to smallest amount, e.g. 10, 5, 2. List assets in order of liquidity and liabilities from largest to smallest amount, e.g. 10, 5, 2.) PRO WINDOW WASHING INC.

32

Income Statement
For the Month Ended July 31, 2012

Revenues
Service revenue

$ $
2545 548 377 254 156

7717

Expenses
Salaries Expense Cleaning Supplies Expense Gas & Oil Expense Depreciation Expense Insurance Expense

Total Expenses Net Income PRO WINDOW WASHING INC. Retained Earnings Statement
For the Month Ended July 31, 2012 Retained earnings, July 1

3880

$

3837

$

0 3837 3837

Add:

Net income

Less:

Dividends

634 3203 $ PRO WINDOW WASHING INC. Balance Sheet July 31, 2012

Retained earnings, July 31

Current assets Cash
Accounts Receivable Cleaning supplies Prepaid Insurance

Assets $
4656 6161 360 1725

Total current assets Property, plant, and equipment Equipment Less:
Accumulated Depreciation 9979 254

$

12902

9725

Total assets Current liabilities Accounts Payable Liabilities and Stockholders’ Equity $
7039

$

22627

33

Salaries Payable

406

Total current liabilities Stockholders’ equity
Common stock Retained earnings 11979 3203

$

7445

Total stockholders’ equity Total liabilities and stockholders’ equity $

15182 22627

Your answer is correct.

Journalize the post closing entries. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.) Date July 31 Account/Description
Service Revenue Income Summary 7717 7717

Debit

Credit

(To close revenue accounts.) July 31
Income Summary Salaries Expense Cleaning Supplies Expense Gas & Oil Expense Depreciation Expense Insurance Expense 1) 3880 2545 548 377 254 156

(To close expense accounts.) July 31
Income Summary Retained Earnings 2) 3837 3837

(To close income summary. ) July 31
Retained Earnings Dividends 634 634

(To close dividends.)

34

Your answer is correct.

Complete the post closing Trial Balance below. (If answer is zero please enter 0, do not leave any fields blank.) PRO WINDOW WASHING INC. Post-Closing Trial Balance July 31, 2012 Debit 4656 $
6161 360 1725 9979 0 0 0 0 0 0 0 0 0 0 0 0

Credit $
0 0 0 0 0 254 7039 406 11979 3203 0 0 0 0 0 0 0

Cash Accounts Receivable Cleaning Supplies Prepaid Insurance Equipment Accumulated Depreciation Accounts Payable Salaries Payable Common Stock Retained Earnings Dividends Service Revenue Salaries Expense Gas & Oil Expense Depreciation Expense Insurance Expense Cleaning Supplies Expense

$

22881

$

22881

Click here if you would like to Show Work for this question

35

Question Attempts: Unlimited

Copyright © 2000-2012 by John Wiley & Sons, Inc. or related companies. All rights reserved.

Title: Started: Submitted:

> Quiz 4 August 28, 2012 11:51 AM August 28, 2012 12:23 PM

Time spent: 00:32:18 Total score: 90/100 = 90% Total score adjusted by 0.0 Maximum possible score: 100

1.
In a service-type business, revenue is considered earned

Student Response A. at the end of the year. B. when cash is received.

36

C. at the end of the month. D. when the service is performed. Score: 10/10

2.
Javier's Tune-Up Shop follows the revenue recognition principle. Javier services a car on August 31. The customer picks up the vehicle on September 1 and mails the payment to Javier on September 5. Javier receives the check in the mail on September 6. When should Javier show that the revenue was earned?

Student Response A. September 6 B. September 1 C. September 5 D. August 31 Score: 10/10

3.
A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be earned?

Student Response

37

A. November 30 B. December 5 C. December 1 D. December 10 Score: 10/10

4.
Reese Company purchased office supplies costing $4,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,600 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be

Student Response A. Debit Office Supplies Expense, $2,400; Credit Office Supplies, $2,400. B. Debit Office Supplies Expense, $1,600; Credit Office Supplies, $1,600. C. Debit Office Supplies, $2,400; Credit Office Supplies Expense, $2,400. D. Debit Office Supplies, $1,600; Credit Office Supplies Expense, $1,600. Score: 10/10

5.
Which of the following acounts would not likely need to be adjusted at year end?

Student Response

38

A. Office Supplies B. Prepaid Advertising C. Unearned Revenue D. Land Score: 10/10

6.
An adjusting entry can include a

Student Response A. debit to an asset and a credit to a revenue. B. debit to a revenue and a credit to an asset. C. credit to a liability and a debit to a revenue. D. debit to an expense and a credit to a revenue. Score: 0/10

7.
Accrued revenues are

Student Response A. earned and recorded as liabilities before they are received.

39

B. earned and already received and recorded. C. received and recorded as liabilities before they are earned. D. earned but not yet received or recorded. Score: 10/10

8.
The Village Laundry Company purchased $6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $3,000 on hand. The adjusting entry that should be made by the company on June 30 is

Student Response A. debit Laundry Supplies Expense, $3,500; credit Laundry Supplies, $3,000 B. debit Laundry Supplies, $3,500; credit Laundry Supplies Expense, $3,500 C. debit Laundry Supplies Expense, $3,500; credit Laundry Supplies, $3,500 D. debit Laundry Supplies Expense, $3,000; credit Laundry Supplies, $3,000 Score: 10/10

9.
Accrued expenses are

Student Response A. incurred and already paid or recorded.

40

B. paid and recorded in an asset account before they are used or consumed. C. paid and recorded in an asset account after they are used or consumed. D. incurred but not yet paid or recorded. Score: 10/10

10.
The balance in the prepaid rent account before adjustment at the end of the year is $9,000 and represents three months rent paid on December 1. The adjusting entry required on December 31 is

Student Response A. debit Rent Expense, $9,000; credit Prepaid Rent $9,000 B. debit Prepaid Rent, $6,000, credit Rent Expense, $6,000 C. debit Prepaid Rent, $3,000; credit Rent Expense $3,000 D. debit Rent Expense, $3,000; credit Prepaid Rent $3,000 Score: 10/10

41

Sample Test 1
ABE1-9 Your answer is correct.

At the beginning of the year, Peale Company had total assets of $900,476 and total liabilities of $534,524. (a) If total assets increased $165,721 during the year and total liabilities decreased $85,034, what is the amount of stockholders' equity at the end of the year? (b) During the year, total liabilities increased $98,461 and stockholders' equity decreased $64,376. What is the amount of total assets at the end of the year. (c) If total assets decreased $81,271 and stockholders' equity increased $110,466 during the year, what is the amount of total liabilities at the end of the year? Assets Liabilities Stockholders' Equity = + (a) (b) (c) $ $ $
1066197 934561 819205

$ $ $

449490 632985 342787

$ $ $

616707 301576 476418

Click here if you would like to Show Work for this question AE1-8 Your answer is correct.

The items and amounts below were taken from Linus Inc.'s 2012 income statement and balance sheet. (a) In each, case, identify whether the item is an asset, liability, stockholder's equity, revenue, or expense item.
Asset Stockholders' equity Expense Expense Asset Asset Asset Revenue Liability Liability Revenue

Cash and short-term investments Retained earnings Cost of goods sold Selling, general, and administrative expenses Prepaid expenses Inventories Receivables Sales revenue Income taxes payable Accounts payable Franchising revenues

$89,064 127,406 445,816 124,171 8,612 74,381 97,431 588,225 6,818 49,962 5,682

42

Expense

Interest expense

2,651

Prepare an income statement for Linus Inc. for the year ended December 31, 2012. (List multiple (b) entries from largest to smallest amounts, e.g. 10, 5, 1.) LINUS INC. Income Statement For the Year Ended December 31, 2012 Revenues:
Sales revenue Franchising revenues

$

588225 5682

Total Revenue Expenses:
Cost of goods sold Selling, general and administrative expenses Interest expense 445816 124171 2651

$

593907

Total expenses Net income Click here if you would like to Show Work for this question AE2-5 Your answer is correct. $

572638 21269

These items are taken from the financial statements of Victory Co. at December 31, 2012. Building Accounts receivable Prepaid insurance Cash Equipment Land Insurance expense Depreciation expense Interest expense Common stock Retained earnings (January 1, 2012) Accumulated depreciation—building Accounts payable Note payable Accumulated depreciation—equipment Interest payable Bowling revenues $87,179 14,944 5,560 16,621 96,655 59,180 780 4,420 2,597 72,726 45,092 38,030 11,267 79,071 18,701 4,118 18,931

Assume that $13,151 of the note payable will be paid in 2013. Complete the following classified balance sheet. (List current assets in order of liquidity and liabilities from largest to smallest amounts, e.g. 10, 5, 1.) VICTORY COMPANY Balance Sheet

43

December 31, 2012

Current assets
Cash Accounts receivable Prepaid insurance

Assets $
16621 14944 5560

Total current assets Property, plant, and equipment
Land Building 59180

$

37125

$
Accumulated depreciation-building

87179 38030 96,655 18,701 77954 186283 49149

Less:

Equipment

Less:

Accumulated depreciation-equipment

Total assets Liabilities and Stockholders' Equity Current liabilities Current portion of note payable
Accounts payable Interest payable

$

223408

$

13151 11,267 4,118

Total current liabilities Long-term liabilities Note payable Total liabilities Stockholders' equity Common stock
Retained earnings 72,726 56226

$

28536

65920 94456

Total stockholders' equity Total liabilities and stockholders' equity Click here if you would like to Show Work for this question $

128952 223408

AE3-3

44

Your answer is correct.

During 2012, its first year of operations as a delivery service, Underwood Corp. entered into the following transactions. 1. 2. 3. 4. 5. 6. 7. 8. 9. Issued shares of common stock to investors in exchange for $103,869 in cash. Borrowed $47,639 by issuing bonds. Purchased delivery trucks for $64,169 cash. Received $16,131 from customers for services provided. Purchased supplies for $5,123 on account. Paid rent of $6,424. Performed services on account for $13,931. Paid salaries of $30,984. Paid a dividend of $13,568 to shareholders.

Using the following tabular analysis, show the effect of each transaction on the accounting equation. (If answer is zero, please enter 0, do not leave any fields blank. For negative numbers use either a negative sign preceding the number, e.g. -45 or parenthesis, e.g. (45).) Liabilities Property, Accounts Plant & Accounts Bonds + Receivable + Supplies + Equipment = Payable + Payable 0 0 0 0 0
0 0 0 0 0 13,931 0 0 13931 0 0 0 5123 0 0 0 0 5123 0 64169 0 0 0 0 0 0 64169 0 0 0 5123 0 0 0 0 5123 47639 0 0 0 0 0 0 0 47639

Assets

Stockholders' Equity Common Retained Stock + Earnings 103869 0
0 0 0 0 0 0 0 0 103869 0 0 16131 0 -6424 13931 -30984 -13568 -20914

Cash 1. 2. 3. 4. 5. 6. 7. 8. 9. Total s
103869 47639 -64169 16131 0 -6424 0 -30984 -13568 52494

+

AE3-8 Your answer is correct.

This information relates to Plunkett Real Estate Agency. Oct. 1 Oct. 2 Stockholders invested $30,592 in exchange for common stock of the corporation. Hires an administrative assistant at an annual salary of $44,690.

45

Oct. 3 Oct. 6 Oct. 10 Oct. 27 Oct. 30

Buys office furniture for $4,961, on account. Sells a house and lot for M.E. Petty; commissions due from Petty, $14,759 (not paid by Petty at this time). Receives cash of $197 as commission for acting as rental agent renting an apartment. Pays $800 on account for the office furniture purchased on October 3. Pays the administrative assistant $3,518 in salary for October.

Journalize the transactions. (If there is no entry for the transaction enter No entry as the account and 0 for the amount.) Date Oct. 1 Account/Description
Cash Common stock 30592 30592 0 0 4961 4961 14759 14759 197 Service revenue 197 800 800 3518 3518

Debit

Credit

Oct. 2

No entry No entry

Oct. 3

Office furniture Accounts payable

Oct. 6

Accounts receivable Service revenue

Oct. 10

Cash

Oct. 27

Accounts payable Cash

Oct. 30

Salaries expense Cash

Click here if you would like to Show Work for this question

AE4-9 Your answer is correct.

The ledger of Sagovic Rental Agency on March 31 of the current year includes these selected accounts before adjusting entries have been prepared.

46

Prepaid Insurance Supplies Equipment Accumulated Depreciation-Equipment Notes Payable Unearned Rent Revenue Rent Revenue Interest Expense Wage Expense An analysis of the accounts shows the following. 1. 2. 3. 4. 5.

Debits $3,600 3,660 25,000

Credits

0 14,000

$8,400 20,000 11,824 60,000

The equipment depreciates $219 per month. Half of the unearned rent revenue was earned during the quarter. Interest of $575 is accrued on the notes payable. Supplies on hand total $843. Insurance expires at the rate of $229 per month.

Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Date Account/Description Debit Credit 1) Mar. Depreciation Expense 657 31
Accumulated Depreciation-Equipment 657 5912 5912 575 575 2817 2817 687 687

2) Mar. 31

Unearned Rent Revenue Rent Revenue

3) Mar. 31

Interest Expense Interest Payable

4) Mar. 31

Supplies Expense Supplies

5) Mar. 31

Insurance Expense Prepaid Insurance

AE4-10 Your answer is correct.

Adam Singh, D.D.S., opened an incorporated dental practice on January 1, 2012. During the first month of operations the following transactions occurred:

47

1. 2. 3. 4. 5.

Performed services for patients who had dental plan insurance. At January 31, $716 of such services was earned but not yet billed to the insurance companies. Utility expenses incurred but not paid prior to January 31 totaled $645. Purchased dental equipment on January 1 for $83,870, paying $20,180 in cash and signing a $63,690, 3-year note payable (Interest is paid each December 31). The equipment depreciates $562 per month. Interest is $681 per month. Purchased a 1-year malpractice insurance policy on January 1 for $28,776. Purchased $2,070 of dental supplies (recorded as increase to Supplies). On January 31 determined that $632 of supplies were on hand.

Prepare the adjusting entries on January 31. Date 1) Jan. 31 Account/Description
Accounts Receivable Service Revenue 716 716 645 645 562 562

Debit

Credit

2) Jan. 31

Utilities Expense Utilities Payable

3) Jan. 31

Depreciation Expense Accumulated Depreciation-Dental Equip.

(To record depreciation.)
Interest Expense Interest Payable 681 681

(To record interest.) 4) Jan. 31
Insurance Expense Prepaid Insurance 2398 2398 1438 1438

5) Jan. 31

Supplies Expense Supplies

Click here if you would like to Show Work for this question

Chapter 5
AP5-2A Your answer is correct.

48

Hayes Warehouse distributes hardback books to retail stores and extends credit terms of 2/10, n/30 to all of its customers. During the month of June the following merchandising transactions occurred. June 1 Purchased books on account for $960 (including freight) from Brooks Publishers, terms 3/10, n/30. 3 Sold books on account to the Mission Viejo Bookstore for $1,725. The cost of the merchandise sold was $690. 6 Received $78 credit for books returned to Brooks Publishers. 9 Paid Brooks Publishers in full. 15 Received payment in full from the Mission Viejo Bookstore. 17 Sold books on account to Book Nook Bookstore for $2,100. The cost of the merchandise sold was $840. 20 Purchased books on account for $720 from Cook Book Publishers, terms 3/15, n/30. 24 Received payment in full from Book Nook Bookstore. 26 Paid Cook Book Publishers in full. 28 Sold books on account to NewTown Bookstore for $1,905. The cost of the merchandise sold was $762. 30 Granted NewTown Bookstore $195 credit for 13 books returned costing $78. Journalize the transactions for the month of June for Hayes Warehouse, using a perpetual inventory system. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2. Round all answers to 0 decimal places, ie. 2,555.) Date June 1 Account/Description
Merchandise Inventory Accounts Payable 960 960 1725 1725

Debit

Credit

June 3

Accounts Receivable Sales

(To record the sale.)
Cost of Goods Sold Merchandise Inventory 690 690

(To record the cost of inventory.) June 6
Accounts Payable Merchandise Inventory 78 78 882 855.54 26.46 1725 Accounts Receivable 1725 2100 2100

June 9

Accounts Payable Cash Merchandise Inventory

June 15

Cash

June 17

Accounts Receivable Sales

(To record the sale.)
Cost of Goods Sold Merchandise Inventory 840 840

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(To record the cost of inventory.) June 20
Merchandise Inventory Accounts Payable 720 720 2058 42 2100 720 698.40 21.60 1905 1905

June 24

Cash Sales Discounts Accounts Receivable

June 26

Accounts Payable Cash Merchandise Inventory

June 28

Accounts Receivable Sales

(To record the sale.)
Cost of Goods Sold Merchandise Inventory 762 762

(To record the cost of inventory.) June 30
Sales Returns and Allow ances Accounts Receivable 195 195

(To record the credit for returned merchandise.)
Merchandise Inventory Cost of Goods Sold 78 78

(To record the merchandise returned.) Click here if you would like to Show Work for this question

AP5-9A At the beginning of the current season on April 1, the ledger of Thousand Oaks Pro Shop showed Cash $3,057; Merchandise Inventory $4,057; and Common Stock $7,114. The following transactions were completed during April 2012.

50

Apr. 5 Purchased golf bags, clubs, and balls on account from Ryder Co. $1,942, terms 3/10, n/60. 7 Paid freight on Ryder purchase $116. 9 Received credit from Ryder Co. for merchandise returned $270. 10 Sold merchandise on account to members $1,183, terms n/30. 12 Purchased golf shoes, sweaters, and other accessories on account from Birdie Sportswear $1,080, terms 1/10, n/30 14 Paid Ryder Co. in full. 17 Received credit from Birdie Sportswear for merchandise returned $280. 20 Made sales on account to members $1,055, terms n/30. 21 Paid Birdie Sportswear in full. 27 Granted an allowance to members for clothing that did not fit properly $90. 30 Received payments on account from members $1,427.

Your answer is correct.

Journalize the April transactions using a periodic inventory system. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2. Round answers to the nearest whole dollar, e.g. 5,275.) Date Apr. 5 Account/Description
Purchases Accounts Payable 1942 1942 116 116 270 270 1183 1183 1080 1080 1672 1621.84 50.16 280 280 1055 1055 800

Debit

Credit

Apr. 7

Freight-in Cash

Apr. 9

Accounts Payable Purchase Returns and Allow ances

Apr. 10

Accounts Receivable Sales

Apr. 12

Purchases Accounts Payable

Apr. 14

Accounts Payable Cash Purchase Discounts

Follow t page 50.

Apr. 17

Accounts Payable Purchase Returns and Allow ances

Apr. 20

Accounts Receivable Sales

Apr. 21

Accounts Payable

51

Cash Purchase Discounts

792 8.00 90 90 1427

Fo on

Apr. 27

Sales Returns and Allow ances Accounts Receivable

Apr. 30

Cash Accounts Receivable

1427

Your answer is correct.

Using T accounts, enter the beginning balances in the ledger accounts and post the April transactions. Complete the trial balance on April 30, 2012 below. (If answer is zero please enter 0, do not leave any fields blank.) THOUSAND OAKS PRO SHOP Trial Balance April 30, 2012 Debit Cash Accounts Receivable Merchandise Inventory Accounts Payable Common Stock Sales Sales Returns and Allowances Purchases Purchase Returns and Allowances Purchase Discounts Freight-in $ $
1954.16 721 4057 0 0 0 90 3022 0 0 116 9960.16

Credit $
0 0 0 0 7114 2238 0 0 550 58.16 0

$

9960.16

52

Your answer is correct.

Complete the income statement through Gross Profit below, assuming merchandise inventory on hand at April 30 is $5,999. (List multiple entries from largest to smallest amounts, e.g. 10, 5, 1. Enter all amounts as positive amounts and subtract where necessary.) THOUSAND OAKS PRO SHOP Income Statement (Partial) For the Month Ended April 30, 2012 Sales revenues
Sales

Less:

Sales Returns and Allow ances

Net Sales Cost of Goods Sold Inventory, April 1
Purchases

$ $
550 58.16

3022

Less:

Purchase returns & all. Purchase discounts

608.12 2413.88 116

Net purchases Add:
Freight-in

Cost of goods purchased Cost of goods available for sale
Inventory, April 30

Cost of goods sold Gross Profit

Test 1
View Attempt 1 of 1
Title: Test #1 September 4, 2012

53

Started: Submitted: Time spent: Total score:

September 4, 2012 10:04 AM September 4, 2012 1:05 PM 03:00:51 82.47/100 = 82.47% Total score adjusted by 12.0 Maximum possible score: 100

1.
At the beginning of the year, assets totaled $400,000 and liabilities totaled $150,000. During the year, the company had $50,000 in revenues, paid $5000 in dividends, had an increase in assets of $200,000 and expenses of $55000. What was the ending balance for liabilities at the end of the year? Student 600,000 = 350,000 - 5,000 + 50,000 - 55,000 Response: Sample Correct Answer Score: Assets=400000+200000=600000 SE=250000+50000-5000-55000=240000 Liabilities=360000

0/5

2.
Special Delivery was started on May 1 with an investment of $45,000 cash. Following are the assets and liabilities of the company on May 31, 20XX, and the revenues and expenses for the month of May, its first month of operations. Accounts receivable $ 6,200 Notes payable Service revenue Advertising expense Accounts payable 10,400 Salaries and wages expense 800 Equipment 2,400 Maintenance and repairs expense $28,000 2,000 56,000 2,900

54

Cash

15,800 Insurance expense

400

No additional common stock was issued in May, but a dividend of $1,700 in cash was paid. Instructions (a) Prepare an income statement for the month of May. Student Income Statement For the Month Ended in May 31, 2012 Revenues Service Response: Revenue 10, 400 Expenses Maintenance and repairs expense - 2,900 Salaries and wages expense - 2,000 Advertising expense - 800 Insurance expense - 400 Total Expenses - - 6100 --------------- Net Income - 4300

Sample Correct Answer

Special Delivery Income Statement For the month ended May 31, 20XX Revenue: Service Revenue...........................................10400 Expenses: Advertising..........................800 Salaries and Wages Exp.......2000 Maint. & Repair Exp.............2900 Insurance Expense...............400 Total Expenses..............................................6100 Net Income...................................................43000 4.67/5

Score:

3.
The following are the major balance sheet classifications. Current assets (CA) Long-term investments (LTI) Current liabilities (CL) Long-term liabilities (LTL)

55

Property, plant, and equipment (PPE) Stockholders' equity (SE) Intangible assets (IA) Instructions Classify each of the following financial statement items taken from Inshore Corporation's balance sheet.

________ Prepaid advertising ________ Equipment ________ Trademarks ________ Salaries and wages payable ________ Income taxes payable ________ Retained earnings ________ Accounts receivable ________ Land held for future use ________ Patents ________ Bonds payable ________ Common stock ________ Accumulated depreciation—equipment ________ Unearned sales revenue ________ Inventory Student ___CA_____ Prepaid advertising ____PPE____ Equipment ____IA____ Response: Trademarks _____CL___ Salaries and wages payable ____CL____ Income taxes payable ____SE____ Retained earnings ____CA____ Accounts receivable _____LTI___ Land held for future use ___IA_____ Patents ____LTL____ Bonds payable ____SE____ Common stock ____PPE____ Accumulated depreciation— equipment ____CL____ Unearned sales revenue ____CA____ Inventory

56

Sample Correct Answer

__CA______ Prepaid advertising __PPE______ Equipment _IA______ Trademarks _CL_______ Salaries and wages payable ___CL_____ Income taxes payable ___SE_____ Retained earnings ___CA_____ Accounts receivable __LTI______ Land held for future use __IA______ Patents __LTL______ Bonds payable __SE______ Common stock __PPE______ Accumulated depreciation— equipment ___CL_____ Unearned sales revenue ___CA_____ Inventory 12/12

Score:

4.
For each item below, indicate whether a debit (DR) or credit (CR) applies. 1. Decrease in Trademark 2. Increase in Accumulated Depreciation 3. Decrease in Unearned Revenues 4. Increase in Dividends 5. Decrease in Interest Receivable 6. Increase in Depreciation Expense 7. Decrease in Mortgage Payable 8. Increase in Supplies 9. Increase in Wages Expense 10. Decrease in Notes Receivable Student 1.CR 2.DR 3.DR 4.DR 5.CR 6.DR 7.DR 8.DR 9.DR 10.CR Response: Sample Correct Answer Score: 1.CR 2.CR 3.DR 4.DR 5.CR 6.DR 7.DR 8.DR 9.DR 10.CR

10.8/12

5.
Analyze and record the following transactions for Marshland Company in a general journal for the month of June. June 1 Stockholders invested $25,000 cash in exchange for common stock to start a 57

business. June 3 Purchased equipment for $4,000 paying $2,000 in cash and the remainder due in 30 days. June 7 Purchased supplies for $1,200 cash. June 8 Received a bill for $200 for advertising. June 13 Cash receipts from customers for pizza sales amounted to $1,500. June 15 Paid salaries of $200 to workers. June 20 Received a deposit of $100 from a customer before starting production. June 21 Paid $200 for advertising that was previously billed on June 8th. June 24 Stockholders were paid dividends of $800. June 28 Incurred utility expenses for month on account, $200. Marshland's chart of accounts includes: Accounts Payable, Accounts Receivable, Advertising Expense, Cash, Common Stock, Dividends, Equipment, Salaries Expense, Sales Revenue, Supplies, Supplies Expense, Unearned Revenue, and Utility Expense. Student Date Account/Description Debit/Credit June 1 Cash/Common Stock Response: 25,000/25,000 June 3 Equipment/ 4,000/0 Cash/ 0/2,000 Accounts Payable 0/2,000 June 7 Cash/Supplies 1,200/1,200 June 8 Advertising Expense/Accounts Receivable 200/200 June 13 Sales Revenue/Cash 1,500/1,500 June 15 Salaries Expense/Cash 200/200 June 20 Cash/Unearned Revenue 100/100 June 21 Accounts Payable/Cash 200/100 June 24 Accounts Payable/Dividends 800/800 June 28 Utility Expenses/Cash 200/200

Sample Correct Answer

June 1 Cash 25000 Common Stock 25000 3 Equipment 4000 Cash 2000 Accounts Payable 2000 7 Supplies 1200 Cash 1200 8 Advertising Expense 200 Accounts Payable 200 13 Cash 1500 Revenue 1500 15 Salaries Expense 200 Cash 200 20 Cash 100 Unearned Revenue 100 21 Accounts Payable 200 Cash 200 24 Dividends 800 Cash 800 28 Utilities Expense 200 Accounts Payable 200

58

Score:

13/21

6.
One of the accounting concepts upon which adjustments for prepayments and accruals are based is:

Student Response A. cost B. monetary unit C. expense recognition D. economic entity Score: 3/3

Value

Correct Answer

Feedback

100%

7.
The revenue recognition principle dictates the revenue should be recognized in the accounting records

Student Response A. when cash is received.

Value

Correct Answer

Feedback

59

B. in the period that income taxes are paid. C. at the end of the month. D. when it is earned. Score: 3/3 100%

8.
On January 1, 2011, M. Johanson Company purchased equipment for $30,000. The company is depreciating the equipment at the rate of $500 per month. The book value of the equipment at December 31, 2011 is:

Student Response A. $24,000 B. $0 C. $6,000 D. $30,000 Score:

Value 100%

Correct Answer

Feedback

3/3

9.
Otto's Tune-Up Shop follows the revenue recognition principle. Otto services a car on August 31. The customer picks up the vehicle on September 1 and mails the payment to Otto on September 5. Otto receives the check in the mail on September 6. When should Otto show that the revenue was earned?

60

Student Response A. August 31 B. September 6 C. August 1 D. September 5 Score: 3/3

Value 100%

Correct Answer

Feedback

10.
The primary difference between prepaid and accrued expenses is that prepaid expenses have

Student Response A. not been paid and accrued expenses have. B. not been recorded and accrued expenses have. C. been recorded and accrued expenses have not. D. been incurred and accrued expenses have not. Score: 3/3

Value

Correct Answer

Feedback

100%

61

11.
Adjusting entries are required

Student Response A. because some costs expire with the passage of time and have not yet been journalized. B. when the company's profits are below the budget. C. when expenses are recorded in the period in which they are earned. D. None of the above. Score: 0/3

Value

Correct Answer

Feedback

0%

12.
An adjusting entry:

Student Response A. is always a compound entry. B. affects a balance

Value

Correct Answer

Feedback

100%

62

sheet account and an income statement account. C. affects two balance sheet accounts. D. affects two income statement accounts. Score: 3/3

13.
A law firm received $2000 cash for legal services to be rendered in the future the full amount was credited to a liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause

Student Response A. expenses to be overstated. B. liabilities to be understated. C. revenues to be understated. D. net income to be overstated. Score: 0/3

Value

Correct Answer

Feedback

0%

14.
63

Greese Company purchased office supplies costing $4,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,100 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be:

Student Response

Value

Correct Answer

Feedback

A. debit Office Supplies 100% Expense, $2,900; credit Office Supplies, $2,900. B. debit Office Supplies, $2,900; credit Office Supplies Expense, $2,900. C. debit Office Supplies, $1,100; credit Office Supplies Expense, $1,100. D. debit Office Supplies Expense, $1,100; credit Office Supplies, $1,100. Score: 3/3

15.
On July 1 the Fisher Shoe Store paid $15,000 to Acme Realty for 6 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by the Fisher Shoe Store is:

Student Response

Value

Correct Answer

Feedback

64

A. debit Prepaid Rent, $2,500; credit Rent Expense, $2,500. B. debit Rent Expense, $15,000; credit Prepaid Rent, $12,500. C. debit Rent Expense, $15,000; credit Prepaid Rent, $2,500. D. debit Rent Expense, $2,500; credit Prepaid Rent, $2,500. Score: 0/3

0%

16.
An accumulated depreciation account

Student Response A. is offset against total assets on the balance sheet. B. is a contra liability account. C. has a normal credit balance.

Value

Correct Answer

Feedback

D. increases on the debit 0%

65

side. Score: 0/3

17.
Which of the statements below is NOT true?

Student Response A. An adjusted trial balance prove the mathematical equality of debits and credits in the ledger. B. An adjusted trial balance is prepared before all transactions have been journalized. C. An adjusted trial balance should show ledger account balances. D. An adjusted trial balance can be used to prepare financial statements. Score: 0/3

Value

Correct Answer

Feedback

0%

18.

66

The following accounts show balances on the adjusted trial balance. Which of these account balances will NOT appears the same on the balance sheet?

Student Response A. Retained Earnings B. Notes Payable C. Accounts Receivable D. Common Stock Score: 3/3

Value 100%

Correct Answer

Feedback

19.
The closing entry process consists of closing

Student Response A. out the Retained Earnings account. B. all asset and liability accounts. C. all temporary accounts. D. all permanent accounts. Score: 3/3

Value

Correct Answer

Feedback

100%

67

20.
At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted. Which of the following statements is true?

Student Response A. Assets at the end of the year are understated. B. Stockholders' equity at the end of the year is understated. C. Salary Expense for the year is overstated. D. Liabilities at the end of the year are understated. Score: 3/3

Value

Correct Answer

Feedback

100%

Jump to Navigation FrameJump to Content Frame Your location: Learning Modules › Chapter 5 › Quiz 5 › >Quiz 5 › Assessments › View All Submissions › View Attempt

View Attempt 1 of 1
Title: >Quiz 5

68

Started:

September 7, 2012 10:31 AM

Submitte September 7, 2012 11:07 AM d: Time spent: Total score: 00:35:57

100/100 = 100%

Total score adjusted by 0.0

Maximum possible score: 100

1.
Net income will result if gross profit exceeds

Student Response A. cost of goods sold. B. cost of goods sold plus operating expenses. C. purchases. D. operating expenses. Score: 10/10

2.
The journal entry to record a return of merchandise purchased on account under a perptual inventory system would credit

Student Response A. Accounts Payable.

69

B. Sales. C. Purchase Returns and Allowances. D. Merchandise Inventory. Score: 10/10

3.
Hunter Company purchased merchandise inventory with an invoice price of $6,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Hunter Company pays within the discount period?

Student Response A. $5,520 B. $5,880 C. $6,000 D. $5,400 Score: 10/10

4.
Freight costs incurred by a seller on merchandise sold to customers will cause an increase

Student Response A. to a contra-revenue account of the seller.

70

B. to the cost of goods sold of the seller. C. in the selling expenses of the buyer. D. in operating expenses for the seller. Score: 10/10

5.
If a company is given credit terms of 2/10, n/30, it should

Student Response A. pay within the credit period buy don't take the trouble to invest the cash while waiting to pay the bill.

B. hold off paying the bill until the end of the credit period, while investing the money at 10% annual interes time. C. recognize that the supplier is desperate for cash and withhold payment until the end of the credit period a lower sales price. D. pay within the discount period and recognize a savings. Score: 10/10

6.
Under the perpetual inventory system, in addition to making the entry to record a sale, a company would

Student Response A. debit Cost of Goods Sold and credit Purchases.

71

B. debit Merchandise Inventory and credit Cost of Goods Sold. C. debit Cost of Goods Sold and credit Merchandise Inventory. D. make no additional entry until the end of the period. Score: 10/10

7.
The credit terms offered to a customer by a business firm were 2/10,n/30, which means

Student Response A. the customer must pay the bill within 10 days. B. two sales returns can be made within 10 days of the invoice date and no returns thereafter. C. the customer can deduct a 2% discount if the bill is paid between the 10th and 30th day from the invoice D. the customer can deduct a 2% discount if the bill is paid within 10 days of the invoice date. Score: 10/10

8.
Ellis Comapny sells merchandise on account for $1,500 to Thomas Company with credit terms of 2/10, n/30. Thomas Company returns $500 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Ellis Company make upon receipt of the check?

Student Response A. debit Cash, $1,000; credit Accounts Receivable $1,000

72

B. debit Cash, $1,470; debit Sales Discount, $30; credit Sales Returns and Allowances, $500; credit Accounts $1,000

C. debit Cash, $980; debit Sales Returns and Allowances, $500; debit Sales Discounts, $20; credit Accounts R D. debit Cash, $980; debit Sales Returns and Allowances, $520; credit Accounts Receivable, $1,000 Score: 10/10

9.
The operating expenses section of an income statement for a merchandising company would not include

Student Response A. Cost of Goods Sold. B. Insurance Expense. C. Freight-Out. D. Utilities Expense. Score: 10/10

10.
Financial information is presented below: Operating Expenses $45,000 Sales Returns and Allowances $13,000 Sales Discount $6,000 Sales $150,000 Cost of Goods Sold $77,000 13,000 + 6,000 = 19,000 150,000 – 19,000 = 131,000 131,000 – 77,000 = 54,000

73

Gross Profit would be

Student Response A. $76,000. B. $54,000. C. $73,000 D. $61,000. Score: 10/10

Chapter 6
AP6-1A Your answer is correct.

Kirk Limited is trying to determine the value of its ending inventory as of February 28, 2012, the

74

company's year-end. The accountant counted everything that was in the warehouse, as of February 28, which resulted in an ending inventory valuation of $56,670. However, she didn't know how to treat the following transactions so she didn't record them. For each of the following transactions, specify whether the item in question should be Included or Excluded in ending inventory, and if so, at what amount. (If excluded from inventory put 0 for the amount, note all boxes must be filled.) Included/Excluded Amount
0

(a)

(b)

(c)

(d) (e)

(f)

(g)

On February 26, Kirk shipped to a customer goods costing $989. The goods were shipped FOB shipping point, and the receiving report indicates that the customer received the goods on March 2. On February 26, Seller Inc. shipped goods to Kirk FOB destination. The invoice price was $522 plus $26 for freight. The receiving report indicates that the goods were received by Kirk on March 2. Kirk had $613 of inventory at a customer's warehouse "on approval." The customer was going to let Kirk know whether it wanted the merchandise by the end of the week, March 4. Kirk also had $600 of inventory at a Balena craft shop, on consignment from Kirk. On February 26, Kirk ordered goods costing $839. The goods were shipped FOB shipping point on February 27. Kirk received the goods on March 1. On February 28, Kirk packaged goods and had them ready for shipping to a customer FOB destination. The invoice price was $485 plus $43 for freight; the cost of the items was $300. The receiving report indicates that the goods were received by the customer on March 2. Kirk had damaged goods set aside in the warehouse because they are no longer saleable. These goods originally cost $481 and, originally, Kirk expected to sell these items for $614.

Excluded

$

Excluded

$

0

Included

$

613

Included

$ $

600

Included

839

Included

$

300

Excluded

$

0

Click here if you would like to Show Work for this question

AP6-3A Your answer is correct.

Remsen Company Inc. had a beginning inventory of 240 units of Product MLN at a cost of $10 per unit. During the year, purchases were: Feb. 20 842 units at $11 Aug. 12 481 units at $13

75

May 5

601 units at $12

Dec. 8

120 units at $14

Remsen Company uses a periodic inventory system. Sales totaled 1,683 units. (a) Determine the cost of goods available for sale.
26807 $ Determine the ending inventory and the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average cost). (For average cost round the per unit calculations to 3 decimal places, e.g. 3.425. Round all answers to 0 decimal places, e.g. 2,500.) FIFO LIFO Average Cost

(b)

Ending Inventory Cost of Goods Sold

$

7933

$

6371

$

7053.937

(c)

18874 20436 19753.063 $ $ $ Which cost flow method results in the lowest inventory amount for the balance sheet? LIFO

Which cost flow method results in the lowest cost of goods sold for the income statement?
FIFO

76

Chapter 8
AP8-1A (a-d) Sellmore.com uses the allowance method to estimate uncollectible accounts receivable. The company produced the following aging of the accounts receivable at year end. Number of Days Outstanding 31-60 61-90 91-120 $96,400 $66,600 $14,000 4% 5% 6%

Accounts receivable % uncollectible

Total $465,400

0-30 $267,400 1%

Over 120 $21,000 10%

Your answer is correct.

Calculate the total estimated bad debts based on the above information. Number of Days Outstanding 31-60 61-90 91-120 $ $ $ 3856 3330 840

Estimated bad debts

Total $ 12800

0-30 $ 2674

Over 120 $ 2100

Your answer is correct.

Prepare the year-end adjusting journal entry to record the bad debts using the aged uncollectible accounts receivable determined in the table above. Assume the unadjusted balance in the Allowance for Doubtful Accounts account is a $5,420 debit. Account/Description
Bad debts expense Allow ance for doubtful accounts 18220 18220

Debit

Credit

Your answer is correct.

77

Of the above accounts, $5,540 is determined to be specifically uncollectible. Prepare the journal entry to write off the uncollectible account. Account/Description
Allow ance for doubtful accounts Accounts receivable 5540 5540

Debit

Credit

Your answer is correct.

The company collects $5,540 subsequently on a specific account that had previously been determined to be uncollectible in the question above. Prepare the journal entry(ies) necessary to restore the account and record the cash collection. Account/Description
Accounts receivable Allow ance for doubtful accounts 5540 5540

Debit

Credit

(To restore the account.)
Cash Accounts receivable 5540 5540

(TO record the cash collection.)

AP8-8A Your answer is correct.

Jander Company closes its books on July 31. On June 30 the Notes Receivable account balance is $24,090. Notes Receivable include the following. Date May 21 May 25 June 30 Maker Allen Inc. Garnham Co. ERV Corp. Face Value $9,150 10,560 11,200 Term 60 days 60 days 6 months Maturity Date July 20 July 24 December 31 Interest Rate 8% 10% 9%

During July the following transactions were completed. July 5 July 14 Made sales of $5,180 on Jander credit cards. Made sales of $600 on Visa credit cards. The credit card service charge is 3%.

78

July 20 Received payment in full from Allen Inc. on the amount due. July 25 Received payment in full from Garnham Co. on the amount due. (a) Journalize the July transactions and the July 31 adjusting entry for accrued interest receivable. Interest is computed using 360 days. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.) Date Account/Description Debit Credit July 5
Accounts receivable Sales 5180 5180 582 18 600 9272 Notes receivable Interest revenue 9150 122 10736 Notes receivable Interest revenue 10560 176 84 84

July 14

Cash Service charge expense Sales

July 20

Cash

July 24

Cash

July 31

Interest receivable Interest revenue

(b)

Enter the balances at July 1 in the receivable accounts and post the entries to all of the receivable accounts. (Use T accounts.) Notes Receivable Interest Receivable 7/1 24090 84 9150 7/31 Bal. 7/20 10560 7/24 7/31 7/31 4380 84 Bal. Bal. Accounts Receivable 7/5
5180

7/31 5180 Bal. (c) Show the balance sheet presentation of the receivable accounts at July 31. Current assets 4380 Notes receivable $ Accounts receivable Interest receivable Total receivables $
5180 84 9644

79

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Submitte September 13, 2012 10:17 AM d: Time spent: Total score: 00:59:35

30/100 = 30%

Total score adjusted by 0.0

Maximum possible score: 100

1.
If goods in transit are shipped FOB destination

Student Response A. no one has legal title tot he goods until they are delivered. B. the seller has legal title to the goods until they are delivered. C. the transportation company has legal title to the goods while the goods are in transit. D. the buyer has legal title to the goods until they are delivered. Score: 0/10

2.
Which of the following should not be included in the physical inventory of a company?

80

Student Response A. Goods shipped on consignment to another company. B. Goods in transit from another company shipped FOB shipping point. C. All of the above should be included. D. Goods held on consignment from another company. Score: 10/10

3.
July 1.......Beginning Inventory..........20 units @ $20 = $400 July 7.......Purchases..........................70 units @ $21 = $1,470 July 22.....Purchases..........................10 units @ $22 = $220 Total cost of goods available........................................$2,090 A physical count of merchandise inventory on July 30 reveals that there are 35 units on hand. Using the average cost method, the value of ending inventory is

Student Response A. $735.00 B. $731.50 C. $770.00 D. $700.00 Score: 0/10

81

4.
July 1.......Beginning Inventory..........20 units @ $20 = $400 July 7.......Purchases..........................70 units @ $21 = $1,470 July 22.....Purchases..........................10 units @ $22 = $220 Total cost of goods available........................................$2,090

A physical count of merchandise inventory on July 30 reveals that there are 35 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for July is

Student Response A. $1,390. B. $1,345. C. $1,380. D. $1,425. Score: 10/10

5.
July 1.......Beginning Inventory..........20 units @ $20 = $400 July 7.......Purchases..........................70 units @ $21 = $1,470 July 22.....Purchases..........................10 units @ $22 = $220 Total cost of goods available........................................$2,090

A physical count of merchandise inventory on July 30 reveals that there are 35 units on hand.

82

Using the FIFO inventory method, the amount allocated to ending inventory for July is

Student Response A. $770. B. $745. C. $700. D. $715. Score: 10/10

6.
Use the inventory information below for the month of July to answer the following question: July 1 Beginning Inventory 20 units at $19 each July 7 Purchase 70 units at $20 each July 22 Purchase 10 units at $22 each A physical count of merchandise inventory on July 31 reveals that there are 35 units on hand. Using the LIFO inventory method, the amount allocated to COST OF GOODS SOLD for July is

Student Response A. $680. B. $720. C. $1,280.

83

D. $1,320. Score: 0/10

7.
Use the inventory information below for the month of July to answer the following question: July 1 Beginning Inventory 20 units at $19 each July 7 Purchase 70 units at $20 each July 22 Purchase 10 units at $22 each A physical count of merchandise inventory on July 31 reveals that there are 35 units on hand. Using the LIFO inventory method, the amount allocated to ENDING INVENTORY for July is

Student Response A. $680. B. $720. C. $1,280. D. $1,320. Score: 0/10

8.
Which of the following statements is true regarding inventory cost flow assumptions?

Student Response

84

A. A company may use more than one costing method concurrently. B. A company must comply with the method specified by industry standard. C. A company must use the same method for domestic and foreign operations. D. A company may never change its inventory costing method once it has chosen a method. Score: 0/10

9.
Two companies report the same cost of goods available for sale but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using

Student Response A. LIFO will have the lowest cost of goods sold. B. FIFO will have the highest cost of goods sold. C. FIFO will have the highest ending inventory. D. LIFO will have the highest ending inventory. Score: 0/10

10.
Which inventory method generally results in costs allocated to ending inventory that will approximate their current cost?

Student Response

85

A. Whichever method that produces the highest ending inventory figure B. FIFO C. LIFO D. Average Cost Method Score: 0/10

86

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90/100 = 90%

Total score adjusted by 0.0

Maximum possible score: 100

1.
The receivable that is usually evidenced by a formal instrument of credit is a(n)

Student Response A. accounts receivable. B. trade receivable. C. notes receivable. D. income tax receivable. Score: 10/10

2.
Accounts receivable are valued and reported on the balance sheet

87

Student Response A. only if they are not past due. B. at gross amounts less sales returns and allowances. C. in the investment section. D. at cash realizable value. Score: 10/10

3.
Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $25,000. If the balance of the Allowance for Doubtful Accounts is $8,000 debit before adjustment what is the balance after adjustment?

Student Response A. $17,000 B. $25,000 C. $8,000 D. $33,000 Score: 10/10

4.
When an account becomes uncollectible and must be written off

88

Student Response A. Sales should be debited. B. Allowance for Doubtful Accounts should be credited. C. Accounts Receivable should be credited. D. Bad Debts Expense should be credited. Score: 10/10

5.
To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a

Student Response A. debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts. B. debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable. C. debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts. D. debit to Loss on Credit Sales and a credit to Accounts Receivable. Score: 10/10

6.
The balance in Allowance for Doubtful Accounts must be considered prior to end of period adjustment when using which of the following methods?

89

Student Response A. Allowance method B. Accrual method C. Direct write-off method D. Net realizable method Score: 10/10

7.
If an account is collected after having been previously written off

Student Response A. there will be both a debit and a credit to accounts receivable. B. both income statement and balance sheet accounts will be affected. C. the allowance account should be debited. D. only the control account needs to be credited. Score: 10/10

8.
Under the allowance method, Bad Debt Expense is recorded

Student Response

90

A. several times during the accounting period. B. when the loss amount is known. C. for an amount that the company estimates is will not collect. D. when an individual account is written off. Score: 10/10

9.
Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $25,000. If the balance of the Allowance for Doubtful Accounts is $8,000 debit before adjustment what is the amount of bad debt expense for that period?

Student Response A. $8,000 B. $25,000 C. $33,000 D. $17,000 Score: 0/10

10.
An aging of a company's accounts receivable indicates that $3,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a

91

Student Response A. a debit to Allowance for Doubtful Accounts for $1,800. B. credit to Allowance for Doubtful Accounts for $3,000. C. debit to Bad Debts Expense for $3,000. D. debit to Bad Debts Expense for $1,800. Score: 10/10

92

Chapter 9
AE9-18 Your answer is correct.

Buckeye Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2012, at a cost of $172,720. Over its 4-year useful life, the bus is expected to be driven 203,200 miles. Salvage value is expected to be $10,160. (a) Compute the depreciation cost per unit. (Round answer to 2 decimal places, e.g. 0.20)

(b)

$ per mile Prepare a depreciation schedule assuming actual mileage was: 2012, 50,800; 2013, 66,040; 2014, 52,070; and 2015, 34,290. (Round depreciation cost per unit to 2 decimal places, e.g. 0.20 and all other answers to 0 decimal places, e.g. 25,330.) Computation End of Year Annual Depreciation Depreciation Accumulated Years Units of Activity × Cost/Unit Expense Depreciation Book Value = 2012 2013 2014 2015

.80

50800 66040 52070 34290

.80 .80 .80 .80

40640 52832 41656 27432

40640 93472 135128 162560

132080 79248 37592 10160

Show Work is REQUIRED for this question; access the WhiteBoard application by clicking this link

AP9-8A Your answer is correct.

Rogers Corporation purchased machinery on January 1, 2012, at a cost of $326,100. The estimated useful life of the machinery is 4 years, with an estimated residual value at the end of that period of $14,700. The company is considering different depreciation methods that could be used for financial reporting purposes. (a) Prepare separate depreciation schedules for the machinery using the straight-line method, and the declining-balance method using double the straight-line rate. (Round answers to 0 decimal places, e.g. 15 or 15%.) STRAIGHT-LINE DEPRECIATION Computation End of Year Annual Depreciable Depreciation Depreciation Accumulated Years Cost × Rate = Expense Depreciation Book Value 2012 2013 $
311400 311400 25 25

% %

$

77850 77850

$

77850 155700

$

248250 170400

93

2014 2015

311400 311400

25 25

%

77850

233550

92550

Years 2012 2013 2014 2015

77850 311400 14700 % DOUBLE-DECLINING-BALANCE DEPRECIATION Computation End of Year Book Value Annual Beginning of Depreciation Depreciation Accumulated Year × Rate = Expense Depreciation Book Value

$

326100 163050 81525 40762

50 50 50 50

% % % %

$

163050 81525 40763

$

163050 244575 285338 311400

$

163050 81525 40762 14700

*26,062

* Adjusted so ending book value will equal salvage value. (b) Which method would result in the higher reported 2012 income?
Straight-line

In the highest total reported income over the 4-year period?
Both

(c)

Which method would result in the lower reported 2012 income?
Double-declining balance

In the lowest total reported income over the 4-year period?
Both

AP9-3A

Your answer is incorrect.

Presented here are selected transactions for Snow Company for 2012. Jan. 1 Retired a piece of machinery that was purchased on January 1, 2002. The machine cost $115,730 on that date and had a useful life of 10 years with no salvage value. Sold a computer that was purchased on January 1, 2009. The computer cost $48,900 and had a useful life of 5 years with no salvage value. The computer was sold for $16,300. Discarded a delivery truck that was purchased on January 1, 2007. The truck cost $50,530

June 30

Dec. 31

94

and was depreciated based on an 8-year useful life with a $4,890 salvage value.

Journalize all entries required on the above dates, including entries to update depreciation on assets disposed of, where applicable. Snow Company uses straight-line depreciation. (Assume depreciation is up to date as of December 31, 2011.) (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2. Round answers to 0 decimal places, e.g. 2,550.) Date Jan. 1 Account/Description
Accumulated depreciation - machinery

Debit
115730

Credit

Machinery

115730

June 30

Depreciation expense

Accumulated depreciation - computer

(To record depreciation on computer.)
Accumulated depreciation - computer 34230

Cash

16300

Computer

48900

Gain on disposal 1630

(To record the sale of the computer.) Dec. 31
Depreciation expense 5705

Accumulated depreciation - truck

5705

(To record depreciation on truck.)
Accumulated depreciation - truck 34230

Loss on disposal

16300

Delivery Truck

50530

(To record disposal of truck.)

95

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Submitte September 17, 2012 11:32 AM d: Time spent: Total score: 00:53:44

70/100 = 70%

Total score adjusted by 0.0

Maximum possible score: 100

1.
A company purchased land for $70,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the cost principle, the cost of land would be recorded at

Student Response A. $70,000 B. $82,000 C. $75,000 D. $77,000

96

Score:

10/10

2.
Recording depreciation each period is necessary in accordance with the

Student Response A. cost principle. B. asset valuation principle. C. matching principle. D. going concern principle. Score: 10/10

3.
In computing depreciation, salvage value is

Student Response A. ignored in all the depreciation methods. B. the fair market value of a plant asset on the date of acquisition. C. an estimate of a plant asset's value at the end of its useful life. D. subtracted from accumulated depreciation to determine the plant asset's depreciable cost. Score: 10/10

97

4.
Equipment with a cost of $192,000 has an estimated salvage value of $18,000 and an estimated life of 4 years or 12,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 3,300 hours?

Student Response A. $43,500 B. $49,500 C. $48,000 D. $52,500 Score: 10/10

5.
A truck was purchased for $15,000 and it was estimated to have a $3,000 salvage value at the end of its useful life. Monthly depreciation expense of $200 was recorded using the straight-line method. The annual depreciation rate is

Student Response A. 2%. B. 25%. C. 16%. D. 20%.

98

Score:

0/10

6.
Which of the following methods of computing depreciation is production based?

Student Response A. units-of-activity B. straight-line C. none of the above D. declining-balance Score: 10/10

7.
On January 1, a machine with a useful life of four years and a residual value of $3,000 was purchased for $19,000. What is the depreciation expense for year 2 under straight-line depreciation?

Student Response A. $4,750 B. $4,000 C. $2,000 D. $8,000

99

Score:

10/10

8.
Bates Company purchased equipment on January 1, 2006, at a total invoice cost of $600,000. The equipment has an estimated salvage value of $15,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2007, if the straight-line method of depreciation is used?

Student Response A. $240,000 B. $120,000 C. $117,000 x 2 = D. 234,000 D. $234,000 Score: 0/10

9.
A machine that was purchased on January 1 for $15,000 has an estimated salvage value of $3,000. If the machine's depreciation rate is 20%, its annual depreciation is

Student Response A. $2,400. B. $12,000. C. $3,000.

100

D. $3,600. Score: 10/10

10.
On October 1, 2007, Colt Company places a new asset into service. The cost of the asset is $40,000 with an estimated 5-year life and $10,000 salvage value at the end of its useful life. What is the book value of the plant asset on the December 31, 2007 balance sheet assuming that Colt Company uses the double-declining method of depreciation?

Student Response A. $26,000 B. $38,000 C. $30,000 D. $36,000 Score: 0/10

Sample Test Review
101

AE5-4 On June 10 Harris Company purchased $8,434 of merchandise from Goetz Company, terms 6/10, n/30. Harris pays the freight costs of $438 on June 11. Damaged goods totaling $574 are returned to Goetz for credit on June 12. On June 19 Harris Company pays Goetz Company in full, less the purchase discount. Both companies use a perpetual inventory system.

Your answer is correct.

Prepare separate entries for each transaction on the books of Harris Company. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2. Round all answers to 0 decimal places, e.g. 2.555.) Date June 10 Account/Description
Merchandise Inventory Accounts Payable 8434 8434 438 438 574 574 7860 7388.4 471.60

Debit

Credit

June 11

Merchandise Inventory Cash

June 12

Accounts Payable Merchandise Inventory

June 19

Accounts Payable Cash Merchandise Inventory

Your answer is correct.

Prepare separate entries for each transaction for Goetz Company. The merchandise purchased by Harris on June 10 cost Goetz $2,178, and the goods returned cost Goetz $225. (If no entry is required write No Entry for the account and 0 for the amount. List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2. Round all answers to 0 decimal places, e.g. 2,555.) Date June 10 Account/Description
Accounts Receivable 8434

Debit

Credit

102

Sales

8434

(To record the sale)
Cost of Goods Sold Merchandise Inventory 2178 2178

(To record the cost of inventory) June 11
No Entry No Entry 0 0 574 574

June 12

Sales Returns and Allow ances Accounts Receivable

(To record return of damaged goods)
Merchandise Inventory Cost of Goods Sold 225 225

(To adjust inventory for the returned goods) June 19
Cash Sales Discounts Accounts Receivable 7388.4 471.60 7860

AE5-13 Your answer is correct.

This information relates to Edyburn Co. 1. 2. 3. 4. 5. On April 5 purchased merchandise from Hansen Company for $28,300, terms 2/10, net/30. On April 6 paid freight costs of $1,487 on merchandise purchased from Hansen Company. On April 7 purchased equipment on account for $30,200. On April 8 returned some of April 5 merchandise to Hansen Company which cost $4,700. On April 15 paid the amount due to Hansen Company in full. (a) Prepare the journal entries to record these transactions on the books of Edyburn o. using a periodic inventory system. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.) Date Account/Description Debit Credit April 5
Purchases Accounts Payable 28300 28300 1487 1487 30200

April 6

Freight-in Cash

April 7

Equipment

103

Same ca

Accounts Payable

30200 4700 4700 23600 23128 472

April 8

Accounts Payable Purchase Returns and Allow ances

April 15

Accounts Payable Cash Purchase Discounts

(b)

Assume that Edyburn Co. paid the balance due to Hansen Company on May 4 instead of April 15. Prepare the journal entry to record this payment. Date Account/Description Debit Credit May 4
Accounts Payable Cash 23600 23600

AE6-1 Your answer is correct.

Worthmore Bank and Trust is considering giving Madsen Company a loan. Before doing so, they decide that further discussions with Madsen's accountant may be desirable. One area of particular concern is the inventory account, which has a year-end balance of $281,522. Discussions with the accountant reveal the following. Determine the correct inventory amount on December 31, by filling in the beginning inventory and adjustments for each item listed below to arrive at corrected inventory. (If no effect input 0 for the amount and if the amount should be deducted enter it with either a negative sign preceding the number, e.g. -45 or parenthesis, e.g. (45). Note all boxes must be filled.) Ending inventory - physical count 1. Madsen sold goods costing $56,627 to Allen Company FOB shipping point on December 28. The goods are not expected to reach Allen until January 12. The goods were not included in the physical inventory because they were not in the warehouse. The physical count of the inventory did not include goods costing $104,195 that were shipped to Madsen FOB destination on December 27 and were still in transit at year-end. Madsen received goods costing $27,350 on January 2. The goods were shipped FOB shipping point on December 26 by Lynch Co. The goods were not included in the physical count. Madsen sold goods costing $51,196 to Finet of Canada FOB destination on December 30. The goods were received in Canada on January 8. They were not included in Madsen's physical inventory. Madsen received goods costing $39,323 on January 2 that were shipped FOB destination on December 29. The shipment was a rush order that was supposed to arrive December 31. This purchase was included in the ending inventory of $281,522. Correct inventory
281522

$

0

2. 3. 4. 5.

0

27350

51196

-39323

$

320745

Click here if you would like to Show Work for this question

104

AE6-5 Your answer is correct.

Klumb Inc. uses a periodic inventory system. Its records show the following for the month of May, in which 96 units were sold. Date May 1 May 15 May 24 Explanation Inventory Purchase Purchase Total Units 37 31 49 117 Unit Cost $11 12 13 Total Cost $407 372 637 $1,416

Calculate the ending inventory at May 31 using the (a) FIFO, (b) average-cost, and (c) LIFO methods. (Round all answers to 0 decimal places, e.g. 2,555. For average cost computations round the per unit cost to 3 decimal places, e.g. 2.550.) FIFO Average-cost LIFO
273 254.154 231

$ $ $

Calculate the amount allocated to cost of goods sold under each method. FIFO Average-cost LIFO
1143 1161.846 1185

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$ $ $

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AE8-7 Your answer is correct.

Gwynne Supply Co. has the following transactions related to notes receivable during the last 2 months of the year. Nov. 1 Dec. 11 Dec. 16 Dec. 31 Loaned $64,950 cash to B. Akey on a 1-year, 8% note. Sold goods to R. P. Mayrl, Inc., receiving a $5,500, 90-day, 7% note. Received an $12,800, 6-month, 9% note to settle an open account from M. Colvin. Accrued interest revenue on all notes receivable.

Journalize the transactions for Gwynne Supply Co. (Round computations and final answers to 0 decimal answers, e.g. 250.) Date Account/Description Debit Credit

105

Nov. 1

Notes receivable Cash

64950 64950 5500 5500 12800 12800 935 935

Dec. 11

Notes receivable Sales

Dec. 16

Notes receivable Accounts receivable

Dec. 31

Interest receivable Interest revenue

AE8-5 (a,b) Your answer is correct.

Parry Company has accounts receivable of $117,500 at March 31, 2012. An analysis of the accounts shows these amounts. Balance, March 31 2012 2011 $69,400 $75,000 20,300 8,000 18,000 2,400 9,800 1,100 $117,500 $86,500

Month of Sale March February December and January November and October

Credit terms are 2/10, n/30. At March 31, 2012, there is a $2,200 credit balance in Allowance for Doubtful sales 2012 respectively. Add to get Accounts prior to adjustment. The company uses the percentage of receivables basis for estimating uncollectible accounts. The company's estimates of bad debts are as follows. total estimated uncollectibles. Estimated Percentage Age of Accounts Uncollectible Current 3% 1-30 days past due 8 31-90 days past due 31 Over 90 days past due 55 Determine the total estimated uncollectibles.
14676 $ Prepare the adjusting entry at March 31, 2012, to record bad debts expense. Date Account/Description Debit

Multiple percentages by month of

(a)

(b)

Credit

Mar. 31

Bad debts expense Allow ance for doubtful accounts

12476 12476

106

AE8-3 Your answer is correct.

At the beginning of the current period, Engseth Corp. had balances in Accounts Receivable of $198,840 and in Allowance for Doubtful Accounts of $9,612 (credit). During the period, it had net credit sales of $801,245 and collections of $651,434. It wrote off as uncollectible accounts receivable of $5,852. However, a $3,922 account previously written off as uncollectible was recovered before the end of the current period. Uncollectible accounts are estimated to total $21,417 at the end of the period. (a) Prepare the entries to record sales and collections during the period. Account/Description Debit
Accounts receivable Sales 801245 801245

Credit

(To record the sales.)
Cash Accounts receivable 651434 651434

(To record the collections.) (b) Prepare the entry to record the write-off of uncollectible accounts during the period. Account/Description Debit Credit
Allow ance for doubtful accounts Accounts receivable 5852 5852

(c) Prepare the entries to record the recovery of the uncollectible account during the period. Account/Description Debit Credit
Accounts receivable Allow ance for doubtful accounts 3922 3922

(To reinstate the account receivable.)
Cash Accounts receivable 3922 3922

(d)

(To record the collection.) Prepare the entry to record bad debts expense for the period. Account/Description
Bad debts expense Allow ance for doubtful accounts 13735

Debit

Credit

13735

(e)

Determine the ending balances in Accounts Receivable and Allowance for Doubtful Accounts. Accounts receivable Allowance for doubtful accounts $
342799

(f)

21417 $ What is the net realizable value of the receivables at the end of the period?

$ 321,382

ABE9-13

107

Your answer is correct.

Alan Chemicals Company acquires a delivery truck at a cost of $37,570 on January 1, 2012. The truck is expected to have a salvage value of $4,602 at the end of its 5-year useful life. Assuming the decliningbalance depreciation rate is double the straight-line rate, compute annual depreciation for the first and second years under the declining-balance method. (Round your computations and answers to 0 decimal places, e.g. 12,550.) First year depreciation Second year depreciation
15028 9016.80

$ $

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ABE9-3 Your answer is correct.

Alan Chemicals Company acquires a delivery truck at a cost of $22,584 on January 1, 2012. The truck is expected to have a salvage value of $4,044 at the end of its 4-year useful life. Compute annual depreciation for the first and second years using the straight-line method. (Round your answers to 0 decimal places, e.g. 2,550.) First year depreciation Second year depreciation
4635 4635

$ $

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ABE9-14 Your answer is correct.

DriveUp Taxi Service uses the units-of-activity method in computing depreciation on its taxicabs. Each cab is expected to be driven 150,000 miles. Taxi 10 cost $23,315 and is expected to have a salvage value of $698. Taxi 10 was driven 27,230 miles in 2011 and 19,119 miles in 2012. Compute the depreciation for each year. (Round your per unit cost to 2 decimal, e.g. 0.25 places before computing depreciation. Round your answers to 0 decimal places, e.g. 12,550.) First year depreciation Second year depreciation
4085 2868

$ $

108

ABE9-7 Your answer is correct.

Prepare journal entries to record these transactions: (a) Benton Company retires its delivery equipment, which cost $45,021. Accumulated depreciation is also $45,021 on this delivery equipment. No salvage value is received. (b) Assume the same information as in part (a), except that accumulated depreciation for Benton Company is $39,194 instead of $45,021. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.) Account/Description (a)
Accum. depr.-delivery equipment Delivery equipment 45021 45021 39194 5827 45021

Debit

Credit

(b)

Accum. depr.-delivery equipment Loss on disposal Delivery equipment

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109

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