The following amounts were taken from the financial statements of Ando Company:
The profit margin ratio for 2014 is
a.20.6%.
b.21.0%.
c.20%.
d.40.9%.
Fornelli Corporation borrowed $480,000 from Central Bank on May 31, 2013. The
three-year, 7% note required annual payments of $182,904 beginning May 31, 2014.
Interest expense for the year ended December 31, 2013 was
a.$19,600.
b.$22,400.
c.$33,600.
d.$0.
When an account becomes uncollectible and must be written off
a.Allowance for Doubtful Accounts should be credited.
b.Accounts Receivable should be credited.
c.Bad Debt Expense should be credited.
d.Sales Revenue should be debited.
Fornelli Corporation borrowed $480,000 from Central Bank on May 31, 2013. The
three-year, 7% note required annual payments of $182,904 beginning May 31, 2014.
The total amount of interest to be paid over the life of the loan is
a.$33,600.
b.$68,712.
c.$134,082.
d.$100,800.
Which account will have a zero balance after closing entries have been journalized and
posted?
a.Service revenue.
b.Supplies.
c.Prepaid Insurance.
d.Accumulated Depreciation.
A credit sale of $700 is made on July 15, terms 2/10, net/30, on which a return of $50 is
granted on July 18. What amount is received as payment in full on July 24?
a.$700
b.$637
c.$650
d$686
A computer company has $3,000,000 in research and development costs. Before
accounting for these costs, the net income of the company is $3,600,000. What is the
amount of net income or loss before taxes after these research and development costs
are accounted for?
a.$600,000 loss.
b.$3,000,000 net income.
c.$600,000 net income.
d.Cannot be determined from the information provided.
Which one of the following contains the selected steps of the accounting cycle in the
correct order?
1)Journalize the transactions.
2)Post transactions to ledger accounts.
3)Analyze transactions.
4)Prepare financial statements.
5)Prepare a trial balance.
a.1, 2, 3, 5, 4
b.3, 2, 1, 4, 5
c.3, 1, 2, 5, 4
d.3, 1, 2, 4, 5
Equipment that cost $54,000 and on which $30,000 of accumulated depreciation has
been recorded was disposed of for $27,000 cash. The entry to record this event would
include a
a.gain of $3,000.
b.loss of $3,000.
c.credit to the Equipment account for $9,000.
d.credit to Accumulated Depreciation for $30,000.
Instructions: Match the cash expenditures given below with the appropriate accounting
treatment. An individual classification may be used more than once, or not at all. If
none of the listed treatments are appropriate for an expenditure, place an “X” in the
answer space.
Treatments
A.Record the expenditure as an asset and depreciate it.
B.Record the expenditure as an asset and amortize it.
C.Record the expenditure as an asset but do not systematically allocate it to expense.
D.Record the expenditure as an expense in the current period.
Expenditures
1)Offered a new flavor of one of the company€s products
2)Purchased a copyright from an author
3)Paid for a complete renovation of the office building
4)Paid for research and development costs
5)Paid closing costs in acquiring new property that will be converted into a parking lot
6)Paid legal costs to successfully defend a patent against infringement
Wolford Company borrowed $1,000,000 from U.S. Bank on January 1, 2013 in order to
expand its mining capabilities. The five-year note required annual payments of
$260,436 and carried an annual interest rate of 9.5%. What is the amount of expense
Wolford must recognize on its 2014 income statement?
a.$95,000
b.$79,284
c.$70,259
d.$62,073
Hachey Company has accounts receivable of $95,100 at March 31, 2014. An analysis of
the accounts shows these amounts.
Credit terms are 2/10, n/30. At March 31, 2014, there is a $2,500 credit balance in
Allowance for Doubtful 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 shown below
Instructions
(a)Determine the total estimated uncollectibles.
(b)Prepare the adjusting entry at March 31, 2014, to record bad debts expense.
Larson Company issued $750,000 of 8%, 5-year bonds at 106. Assuming straight-line
amortization and annual interest payments, what is the amount of the amortization at
each interest payment point?
a.$4,500
b.$9,000
c.$60,000
d.$51,000
The information below relates to the Cash account in the ledger of Remington
Company.
Balance September 1€$25,720 Cash deposited€$96,000.
Balance September 30€$26,100 Checks written€$95,620.
The September bank statement shows a balance of $24,635 on September 30 and the
following memoranda.
At September 30, deposits in transit were $7,195, and outstanding checks totaled
$2,575.
Instructions
Prepare the bank reconciliation at September 30.
A company shows the following balances:
What is the gross profit rate?
a.56%
b.70%
c.44%
d.30%
Storage Products purchased 11,000 shares of its own $0.75 par value common stock at a
cost of $8 per share on April 30, 2014. The stock was originally issued at $7 per share.
Which of the following is part of the journal entry to record the purchase?
a.Credit Common Stock for $88,000
b.Debit Treasury Stock for $88,000
c.Credit Common Stock for $8,250
d.Debit Treasury Stock for $8,250
Pearson Company bought a machine on January 1, 2014. The machine cost $144,000
and had an expected salvage value of $24,000. The life of the machine was estimated to
be 5 years. The depreciable cost of the machine is
a.$144,000.
b.$120,000.
c.$40,000.
d.$24,000.
If Norben Company issues 4,000 shares of $5 par value common stock for $140,000,
the account
a.Common Stock will be credited for $140,000.
b.Paid-in Capital in Excess of Par Value will be credited for $20,000.
c.Paid-in Capital in Excess of Par Value will be credited for $120,000.
d.Cash will be debited for $120,000.
Simonic Retailers accepted $90,000 of Citibank Visa credit card charges for
merchandise sold on July 1. Citibank charges 4% for its credit card use. The entry to
record this transaction by Simonic Retailers will include a credit to Sales Revenue of
$90,000 and a debit(s) to
a.Cash $86,400 and Service Charge Expense $3,600.
b.Accounts Receivable $86,400 and Service Charge Expense $3,600.
c.Cash $86,400 and Interest Expense $3,600.
d.Accounts Receivable $90,000.
The balance in the prepaid rent account before adjustment at the end of the year is
$15,000 and represents three months rent paid on December 1. The adjusting entry
required on December 31 is:
a.debit Prepaid Rent, $5,000; credit Rent Expense $5,000.
b.debit Prepaid Rent, $10,000; credit Rent Expense, $10,000.
c.debit Rent Expense, $15,000; credit Prepaid Rent, $15,000.
d.debit Rent Expense, $5,000; credit Prepaid Rent, $5,000.
Shatner Company has budgeted sales revenue as follows:
Past experience has indicated that 80% of sales each month are on credit and that
collection of credit sales occurs as follows: 60% in the month of sale, 30% in the month
following the sale, and 5% in the second month following the sale. The other 5% is
uncollectible.
Instructions
Prepare a schedule which shows expected cash receipts from sales for the months of
April, May, and June.
Indicate whether each of the business practices listed below strengthens (S) or weakens
(W) a company€s system of internal control.
Use the following information to perform the calculations below (using the indirect
method). Clearly label the amount of each answer as positive or negative and show all
your calculations.
Calculate the amount of cash flows from operating activities._____________
Calculate the amount of cash flows from investing activities._____________
Calculate the amount of cash flows from financing activities._____________
Calculate the net change in cash._____________
A gift shop signs a three-month note payable to help finance increases in inventory for
the Christmas shopping season. The note is signed on November 1 in the amount of
$30,000 with annual interest of 6%. What is the adjusting entry to be made on
December 31 for the interest expense accrued to that date, if no entries have been made
previously for the interest?
Which of the following combinations presents correct examples of liquidity,
profitability, and solvency ratios, respectively?
The Old Fix-It is a company specializing in the restoration of old homes. To showcase
its work, the company purchased an old Victorian home in downtown Pittsburg, Kansas
on January 2, 2010. The original home was purchased for $125,000. A new heating and
air-conditioning system was added for $30,000. The house was completely rewired and
re-plumbed at a cost of $50,000. Custom cabinets were added, and the floors and trim
were refurbished to their original condition, at a cost of $75,000.
The project was such a success, that Old Fix-It decided on January 2, 2014, to purchase
another very large home, this time in nearby Joplin, Missouri. On January 3, 2014, a
realtor offered to purchase the home in Pittsburg for $175,000. He plans to lease it as
luxury short-term apartments for visiting dignitaries. Mark Gibson, the president of Old
Fix-It, decided that the $50,000 gain over purchase price was appropriate, and so he
agreed to sell the showcase house. Only afterward did he learn that Old Fix-It had a loss
of almost $30,000 on the sale. Mark does not believe that a loss is possible. “We sold
that house for more than we paid for it,” he said. “I know we put some money in it, but
we had depreciated it for four years. How in the world can we have a loss?”
Due to the commercial aspects of the property and its expected traffic flow, the life of
the showcase house was established as 15 years. Old Fix-It utilized straight-line
depreciation with no salvage or residual value. Old Fix-It took full years’ of
depreciation in 2010 through 2013 and none in 2014 due to the sale date of January 3,
2014.
Required:
Write a short memo to Mr. Gibson explaining how it would be possible to have a loss.
Address cost and depreciation as general numbers rather than specific values.
Strickman Company uses the allowance method for estimating uncollectible accounts.
Prepare journal entries to record the following transactions:
Journey Luggage uses a periodic inventory system and has the following account
balances:
Instructions: Compute each of the following:
(1)Net purchases
(2)Cost of goods available for sale
(3)Cost of goods sold