ABC Company accepted a national credit card for a $7,000 purchase. The cost of the
goods sold is $5,600. The credit card company charges a 3% fee. What is the impact of
this transaction on net operating income?
a.Increase by $1,358.
b.Increase by $1,400.
c.Increase by $1,190.
d.Increase by $6,790.
If beginning inventory is understated by $10,000, the effect of this error in the current
period is
Cost of Goods Sold Net Income
a. Understated Understated
b. Overstated Overstated
c. Understated Overstated
d. Overstated Understated
Using the allowance method, the uncollectible accounts for the year is estimated to be
$40,000. If the balance for the Allowance for Doubtful Accounts is a $9,000 credit
before adjustment, what is the amount of bad debt expense for the period?
a.$9,000
b.$31,000
c.$40,000
d.$49,000
An asset was purchased for ¥200,000. It had an estimated residual value of ¥40,000 and
an estimated useful life of 10 years. After 5 years of use, the estimated residual value is
revised to ¥32,000 but the estimated useful life is unchanged. Assuming straight-line
depreciation, depreciation expense in year 6 would be
a.¥24,000.
b.¥17,600.
c.¥12,000.
d.¥16,800.
Carpino Company purchased equipment and these costs were incurred:
What amount should be recorded as the cost of the equipment?
a.$70,000.
b.$73,500.
c.$74,250.
d.$75,750.
The following transactions are for Kale Company.
(1)On December 3 Kale Company sold $500,000 of merchandise to Thomson Co.,
terms 1/10, n/10. The cost of the merchandise sold was $320,000.
(2)On December 8 Thomson Co. was granted an allowance of $20,000 for merchandise
purchased on December 3.
(3)On December 13 Kale Company received the balance due from Thomson Co.
Instructions
(a)Prepare the journal entries to record these transactions on the books of Kale
Company. Kale uses a perpetual inventory system.
(b)Assume that Kale Company received the balance due from Thomson Co. on January
2 of the following year instead of December 13. Prepare the journal entry to record the
receipt of payment on January 2
Which of the following expressions is incorrect?
a.Gross profit – Operating expenses = Net income
b.Sales revenue – cost of goods sold – Operating expenses = Net income
c.Net income + Operating expenses = Gross profit
d.Operating expenses – Cost of goods sold = Gross profit
Hogan Industries had the following inventory transactions occur during 2014:
The company sold 102 units at $63 each and has a tax rate of 30%. Assuming that a
periodic inventory system is used and operating expenses of $600, what is the
company’s after-tax income using FIFO? (rounded to whole dollars)
a.$944
b.$1,096
c.$767
d.$661
A $200 petty cash fund has cash of $37 and receipts of $160. The journal entry to
replenish the account would include a
a.debit to Cash for $160.
b.credit to Petty Cash for $163.
c.debit to Cash Over and Short for $3.
d.credit to Cash for $160.
On April 1, 2013, nPropel Corporation paid $48,000 cash for equipment that will be
used in business operations. The equipment will be used for four years. nPropel records
depreciation expense of $48,000 for the calendar year ending December 31, 2013.
Which accounting principle has been violated?
a.Depreciation principle.
b.No principle has been violated.
c.Cash principle.
d.Expense recognition principle.
The entry to record a sale of $1,200 with terms of 2/10, n/30 will include a
a.debit to Sales Discounts for $24.
b.debit to Sales Revenue for $1,176.
c.credit to Accounts Receivable for $1,200.
d.credit to Sales Revenue for $1,200.
If total liabilities decreased by $50,000 and stockholders’ equity increased by $10,000
during a period of time, then total assets must change by what amount and direction
during that same period?
a.$40,000 decrease
b.$40,000 increase
c.$50,000 increase
d.$60,000 increase
Sielert Corporation borrowed $900,000 from National Bank on May 31, 2013. The
three-year, 7% note required annual payments of $342,945 beginning May 31, 2014.
Interest expense for the year ended December 31, 2013 was
a.$36,750.
b.$42,000.
c.$63,000.
d.$0.
On January 1, a machine with a useful life of four years and a residual value of $12,000
was purchased for $60,000. What is the depreciation expense for year 2 under
straight-line depreciation?
a.$5,000.
b.$24,000.
c.$12,000.
d.$30,000.
Equipment with a cost of $225,000 has an estimated salvage value of $15,000 and an
estimated life of 4 years or 10,000 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 2,700 hours?
a.$56,250.
b.$52,500.
c.$56,700.
d.$54,375.
Laser Performance Inc. has the following information available (amount in thousands).
What is the current cash debt coverage?
a.1.333 times.
b..600 times .
c..833 times .
d..369 times.
Wiggins Company is considering purchasing equipment. The equipment will produce
the following cash flows: Year 1, $50,000; Year 2, $90,000; Year 3, $130,000. Below is
some of the time value of money information that Wiggins has compiled that might
help them in their planning and compounded interest decisions.
Wiggins requires a minimum rate of return of 11%. To the closest dollar, what is the
maximum price Wiggins should pay for the equipment?
a.$219,137
b. $213,146
c.$218,099
d.$208,499
The amount you must deposit now in your savings account paying 5% interest, in order
to accumulate $15,000 for your first tuition payment when you start college in 3 years
is
a.$13,350.
b.$12,957.60.
c.$12,594.30.
d.$13,289.40.
Using the following balance sheet and income statement data, what is the current ratio?
Average common shares outstanding was 10,000.
a.0.78 : 1
b.3.33 : 1
c.0.57 : 1
d.1.75: 1
Rains Company purchased equipment on January 1 at a list price of $75,000, with
credit terms 2/10, n/30. Payment was made within the discount period. Rains paid
$3,750 sales tax on the equipment, and paid installation charges of $1,320. Prior to
installation, Rains paid $3,000 to pour a concrete slab on which to place the equipment.
What is the total cost of the new equipment?
a.$78,750.
b.$81,570.
c.$83,070.
d.$75,750.