What does the balance in the Discount on Bonds Payable account represent?
a.Additional interest cost associated with the issuance of debt
b.A reduction of interest cost associated with the issuance of debt
c.A reduction of the maturity value of the bonds
d.An increase of the maturity value of the bonds
The December 31, 2013, balance sheet of the Kramer Company had Accounts
Receivable of $650,000 and a credit balance in Allowance for Doubtful Accounts of
$33,000. During 2014, the following transactions occurred: sales on account
$1,550,000; sales returns and allowances, $100,000; collections from customers,
$1,250,000; accounts written off, $35,000; previously written off accounts of $8,000
were collected.
Instructions
(a)Journalize the 2014 transactions.
(b)If the company uses the percentage of receivables basis to estimate bad debt expense
and determines that uncollectible accounts are expected to be 6% of accounts
receivable, what is the adjusting entry at December 31, 2014?
Which one of the following is true?
a.Intangible assets are current assets that do not have physical substance.
b.Obligations expected to be paid after one year are classified as expenses.
c.Current assets are assets that a company expect to convert to cash or use up within the
longer of one year or its operating cycle.
d.Property, plant, and equipment are assets with relatively long useful lives that are held
for resale purposes.
Which of the following items is an item considered to be part of comprehensive
income, but is not reported as part of net income?
a.A gain from the disposal of plant assets
b.A realized loss from the sale of a trading security
c.An unrealized gain on an available-for-sale security
d.An extraordinary loss
In a period of rising prices, which inventory method will result in the largest amount of
net income?
a.LIFO
b.FIFO
c.Average cost
d.Specific identification
Net credit sales for the month are $750,000. The accounts receivable balance is
$160,000. The allowance is calculated as 5% of the receivables balance using the
percentage-of-receivables basis. If the Allowance for Doubtful Accounts has a credit
balance of $5,000 before adjustment, what is the balance after adjustment?
a.$ 8,000
b.$ 3,000
c.$13,000
d.$ 8,250
The principle that indicates that assets should be reported at the price received to sell an
asset is the
a.historical cost principle.
b.fair value principle.
c.full disclosure principle.
d.consistency principle.
The following credit sales are budgeted by Gonzalez Company:
The company€s past experience indicates that 80% of the accounts receivable are
collected in the month of sale, 20% in the month following the sale. The anticipated
cash inflow for the month of April is
a.$144,000.
b.$168,000.
c.$180,000.
d.$186,000.
Which statement below is true concerning a perpetual inventory system?
a.It allows for the determination of cost of goods sold after each sale.
b.It requires a physical inventory count to determine the cost of goods on hand.
c.Cost of goods sold is determined based on a physical count at the end of the period.
d.It is used infrequently due to the high cost of determining the cost of goods acquired.
On January 1, Hamblin Corporation had 90,000 shares of $10 par value common stock
outstanding. On March 17 the company declared a 10% stock dividend to stockholders
of record on March 20. Market value of the stock was $13 on March 17. The stock was
distributed on March 30. The entry to record the transaction of March 30 would include
a
a.credit to Cash for $90,000.
b.debit to Common Stock Dividends Distributable for $90,000.
c.credit to Paid-in Capital in Excess of Par Value for $27,000.
d.debit to Stock Dividends for $27,000.
Accounts receivable arising from sales to customers amounted to $35,000 and $40,000
at the beginning and end of the year, respectively. Income reported on the income
statement for the year was $203,000. Exclusive of the effect of other adjustments, the
cash flows from operating activities to be reported on the statement of cash flows is
a.$203,000.
b.$208,000.
c.$238,000.
d.$198,000.
A plant asset with a cost of $480,000 and accumulated depreciation of $456,000 is sold
for $56,000. What is the amount of the gain or loss on disposal of the plant asset?
a.$56,000 loss.
b.$32,000 loss.
c.$32,000 gain.
d.$56,000 gain.
Greenstream Insurance Agency prepares monthly financial statements. Presented below
is an income statement for the month of June that is correct on the basis of information
considered.
GREENSTREAM INSURANCE AGENCY
Income Statement
For the Month Ended June 30
Additional Data: When the income statement was prepared, the company accountant
neglected to take into consideration the following information:
1>A utility bill for $1,200 was received on the last day of the month for electric and gas
service for the month of June.
2>A company insurance salesman sold a life insurance policy to a client for a premium
of $10,000. The agency billed the client for the policy and is entitled to a commission of
20%.
3>Supplies on hand at the beginning of the month were $2,500. The agency purchased
additional supplies during the month for $1,500 in cash and $1,200 of supplies were on
hand at June 30.
4>The agency purchased a new car at the beginning of the month for $24,000 cash. The
car will depreciate $6,000 per year.
5>Salaries owed to employees at the end of the month total $5,300. The salaries will be
paid on July 5
Instructions:
Prepare a corrected income statement.
Menke Company is a furniture retailer and uses the perpetual inventory system. On
January 14, 2014, Menke purchased merchandise inventory at a cost of $45,000. Credit
terms were 2/10, n/30. The inventory was sold on account for $60,000 on January 21,
2014. Credit terms were 1/10, n/30. The accounts payable was settled on January 23,
2014, and the accounts receivables were settled on January 30, 2014. Prepare journal
entries to record each of these transactions.
Torrey Company uses the periodic inventory system to account for inventories.
Information related to Torrey Company’s inventory at October 31 is given below:
Instructions
1>Show computations to value the ending inventory using the FIFO cost assumption if
500 units remain on hand at October 31
2>Show computations to value the ending inventory using the weighted-average cost
method if 500 units remain on hand at October 31
3>Show computations to value the ending inventory using the LIFO cost assumption if
500 units remain on hand at October 31
Match the items below by entering the appropriate code letter in the space provided.
The following accounts appear in the ledger of Bradley, Inc., after the books are closed
at December 31, 2014.
Instructions
Prepare the stockholders’ equity section at December 31, 2014, assuming that part of
retained earnings is restricted for plant expansion in the amount of $200,000.
Under a double-entry system, show how the entry in each statement is entered in the
ledger by using debit or credit to indicate the increase or decrease in the affected
account.
Holcomb Company expects to have a cash balance of $43,000 on January 1, 2014.
These are the relevant monthly budget data for the first two months of 2014.
Instructions
Prepare a cash budget for January and February.
Donaldson Company has the following accounts in its general ledger at July 31:
Accounts Receivable $40,000 and Allowance for Doubtful Accounts $2,500. During
August, the following transactions occurred.
Susan Jones works for Trend Press, a fairly large book publishing firm. Her best friend
and rival, Diane Nilson, works for Lifeline Books, a smaller publisher. Both companies
issue $100,000 in bonds on July 1. Trend’s bonds were issued at a discount, while
Lifeline’s were issued at a premium. Diane sent Susan a fax the next day. She told
Susan that it was obvious who the better publisher was and the market had shown its
preference! She reminded Susan again of her recent increase in salary as further proof
of the superiority of Lifeline Books.
Required:
Draft a short note for Susan to send to Diane. Explain how such a result could occur.
Snelling Tables paid employee wages on and through Friday, January 26, and the next
payroll will be paid in February. There are three more working days in January (29-31).
Employees work 5 days a week and the company pays $900 a day in wages. What will
be the adjusting entry to accrue wages expense at the end of January?