Molina Company had a $700 credit balance in Allowance for Doubtful Accounts at
December 31, 2015, before the current year’s provision for uncollectible accounts. An
aging of the accounts receivable revealed the following:
Instructions
(a) Prepare the adjusting entry on December 31, 2015, to recognize bad debt expense.
(b) Assume the same facts as above except that the Allowance for Doubtful Accounts
account had a $500 debit balance before the current year’s provision for uncollectible
accounts. Prepare the adjusting entry for the current year’s provision for uncollectible
accounts.
(c) Assume that the company has a policy of providing for bad debts at the rate of 1%
of sales, that sales for 2015 were $550,000, and that Allowance for Doubtful Accounts
had a $650 credit balance before adjustment. Prepare the adjusting entry for the current
year’s provision for bad debts.
Answer:
On January 1, 2014, Lark Corporation purchased 35% of the common stock outstanding
of Dinc Corporation for $700,000. During 2014, Dinc Corporation reported net income
of $200,000 and paid cash dividends of $100,000. The balance of the Stock
Investments’”Dinc account on the books of Lark Corporation at December 31, 2014 is
a. $700,000.
b. $735,000.
c. $770,000.
d. $665,000.
Answer:
Sales taxes collected by a retailer are reported as
a. contingent liabilities.
b. revenues.
c. expenses.
d. current liabilities.
Answer:
Unrealized gains and losses related to available-for-sale/non-trading equity
investments are reported in other comprehensive income under
a. GAAP only.
b. IFRS only.
c. Both GAAP and IFRS.
d. Neither GAAP or IFRS.
Answer:
The maturity value of a $50,000, 9%, 60-day note receivable dated July 3 is
a. $50,000.
b. $50,750.
c. $54,500.
d. $59,000.
Answer:
Which of the following would be considered as an unlikely occurrence?
a. Manufacturer offers a cash discount to a wholesaler.
b. Wholesaler offers a cash discount to a retailer.
c. Retailer offers a cash discount to a customer.
d. All of these answers are correct.
Answer:
When a petty cash fund is in use,
a. an entry must be made to the appropriate expense, asset, etc. account when a
disbursement is made.
b. the size of the fund should be such that it can be used to cash employees’ bi-monthly
payroll checks.
c. entries are generally made to Petty Cash only when it is initially set up or the
stipulated amount of the fund is changed.
d. an entry is made to Petty Cash when the fund is replenished to its original amount.
Answer:
Aaron, Inc. paid $120,000 to buy back 10,000 shares of its $1 par value common stock.
This stock was sold later at a selling price of $8 per share. The entry to record the sale
includes a
a. debit to Retained Earnings for $40,000.
b. credit to Retained Earnings for $10,000.
c. debit to Paid-in Capital from Treasury Stock for $120,000.
d. credit to Paid-in Capital from Treasury Stock for $10,000.
Answer:
In most companies, current liabilities are paid within
a. one year through the creation of other current liabilities.
b. the operating cycle through the creation of other current liabilities.
c. one year or the operating cycle out of current assets.
d. the operating cycle out of current assets.
Answer:
When two or more people get together for the purpose of circumventing prescribed
controls, it is called
a. a fraud committee.
b. collusion.
c. a division of duties.
d. bonding of employees.
Answer:
Retained earnings at the end of the period is equal to
a. retained earnings at the beginning of the period plus net income minus liabilities.
b. retained earnings at the beginning of the period plus net income minus dividends.
c. net income.
d. assets plus liabilities.
Answer:
A credit granted to a customer for returned goods requires a debit to
a. Sales Revenue and a credit to Cash.
b. Sales Returns and Allowances and a credit to Accounts Receivable.
c. Accounts Receivable and a credit to a contra-revenue account.
d. Cash and a credit to Sales Returns and Allowances.
Answer:
A single-column purchases journal indicates that
a. only purchases of merchandise on account can be recorded.
b. all purchases of merchandise can be recorded.
c. all acquisitions on account can be recorded.
d. another column must be added so that debits and credits can be recorded.
Answer:
Financial information is presented below:
Gross profit would be
a. $26,000.
b. $116,000.
c. $128,000.
d. $134,000.
Answer:
Dixon Corp. purchased 20,000 shares of its own $2 par common stock at a cost of $13
per share on April 30, 2015. The stock was originally issued at $11 per share. The entry
to record the purchase of the stock should include a debit to
a. Common Stock for $40,000.
b. Treasury Stock for $40,000.
c. Common Stock for $260,000.
d. Treasury Stock for $260,000.
Answer:
The sale of equipment at less than its book value is a(n) ______________ of cash that is
reported in the ______________ activities section.
Answer:
On March 1, 2015, Dick Miles purchased a suit at Kenny’s Fine Apparel Store. The suit
cost $600 and Dick used his Kenny credit card. Kenny charges 2% per month interest if
payment on credit charges is not made within 30 days. On April 30, 2015, Dick had not
yet made his payment. What entry should Kenny make on April 30th?
Answer:
Compute the future value of $6,000 invested every year at an interest rate of 9%. You
invest the money for 20 years with the first payment made at the end of the year.
Answer:
A consolidated income statement will reflect only revenue and expense transactions
between the consolidated entity and parties outside the affiliated group.
Answer:
Research and development costs should be charged to expense when incurred.
Answer:
Generally accepted accounting principles require that the direct write-off method be
used for financial reporting purposes if it is also used for tax purposes.
Answer:
The percentage of receivables basis of estimating expected uncollectible accounts
emphasizes income statement relationships.
Answer:
For the accounts listed below, indicate if the normal balance of the account is a debit or
credit.
Answer:
The Fair Value Adjustment account can only have a credit balance or a zero balance.
Answer: