Accounting What the Numbers Mean David Marshall 12th Edition – Test Bank

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Accounting What the Numbers Mean David Marshall 12th Edition – Test Bank

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Accounting – What the Numbers Mean, 12e (Marshall)

Chapter 2   Financial Statements and Accounting Concepts/Principles

 

1) Which of the following is not a transaction to be recorded in the accounting records of an entity?

1. A) Investment of cash by the owners.
2. B) Sale of product to customers.
3. C) Receipt of a plaque recognizing the firm’s encouragement of employee participation in the United Way fund drive.
4. D) Receipt of services from a “quick-print” shop in exchange for the promise to provide advertising design services of equivalent value.

 

2) The balance sheet might also be called:

1. A) Statement of Financial Position.
2. B) Statement of Assets.
3. C) Statement of Changes in Financial Position.
4. D) Statement of Equity.

 

3) Transactions are summarized in:

1. A) the notes for the financial statements.
2. B) the independent auditor’s report.
3. C) the entity’s accounts.
4. D) the Accounting Standards Updates (ASUs).

 

4) A fiscal year:

1. A) is always the same as the calendar year.
2. B) is frequently selected based on the firm’s operating cycle.
3. C) must always end on the same date each year.
4. D) must end on the last day of a month.

 

5) Which of the following is not a principal form of business organization?

1. A) Partnership.
2. B) Sole proprietorship.
3. C) Limited unregistered business.
4. D) Corporation.

 

6) The time frame associated with a balance sheet is:

1. A) a point in time in the past.
2. B) a one-year past period of time.
3. C) a single date in the future.
4. D) a function of the information included in it.

 

 

 

7) Current U.S. Generally Accepted Accounting Principles and auditing standards require the financial statements of an entity for the reporting period to include:

1. A) earnings and gross receipts of cash for the period.
2. B) projected earnings for the subsequent period.
3. C) financial position at the end of the period.
4. D) current fair values of all assets at the end of the period.

 

8) The balance sheet equation can be represented by:

1. A) Assets = Liabilities + Stockholders’ Equity
2. B) Assets – Liabilities = Stockholders’ Equity
3. C) Net Assets = Stockholders’ Equity
4. D) All of the answers are correct.

 

9) Stockholders’ equity refers to which of the following?

1. A) A listing of the organization’s assets and liabilities.
2. B) The ownership right of the stockholder(s) of the entity.
3. C) Probable future sacrifices of economic benefits.
4. D) The amount of resources controlled by the entity.

 

10) Accumulated depreciation on a balance sheet:

1. A) is part of stockholders’ equity.
2. B) represents the portion of the cost of an asset that is assumed to have been “used up” in the process of operating the business.
3. C) represents cash that will be used to replace worn out equipment.
4. D) recognizes the economic loss in value of an asset because of its age or use.

 

11) The distinction between a current asset and other assets is based on:

1. A) how long the asset has been owned.
2. B) amounts that will be paid to other entities within a year.
3. C) the ability to determine the current fair value of the asset.
4. D) when the asset is expected to be converted to cash, or used to benefit the entity.

 

12) The income statement shows amounts for:

1. A) revenues, expenses, losses, and liabilities.
2. B) revenues, expenses, gains, and fair value per share.
3. C) revenues, assets, gains, and losses.
4. D) revenues, gains, expenses and losses.

 

13) The time frame associated with an income statement is:

1. A) a point in time in the past.
2. B) a past period of time.
3. C) a future period of time.
4. D) a function of the information included in it.

 

 

 

14) Revenues are:

1. A) cash receipts.
2. B) increases in net assets from selling products or providing services.
3. C) increases in net assets from occasional sales of equipment.
4. D) increases in net assets from selling common stock.

 

15) Expenses are:

1. A) cash disbursements.
2. B) decreases in net assets from uninsured accidents.
3. C) decreases in net assets from dividends to stockholders.
4. D) decreases in net assets resulting from usual operating activities.

 

16) The purpose of the income statement is to show the:

1. A) change in the fair value of the assets from the prior income statement.
2. B) market value per share of stock at the date of the statement.
3. C) revenues collected during the period covered by the statement.
4. D) net income or net loss for the period covered by the statement.

 

17) The Statement of Changes in Stockholders’ Equity shows:

1. A) the change in cash during a year.
2. B) revenues, expenses, and liabilities for the period.
3. C) net income and dividends for the period.
4. D) paid-in capital and long-term debt at the end of the period.

 

18) Paid-in Capital represents:

1. A) earnings retained for use in the business.
2. B) the amount invested in the entity by the stockholders.
3. C) fair value of the entity’s common stock.
4. D) net assets of the entity at the date of the statement.

 

19) Retained Earnings represents:

1. A) the amount invested in the entity by the stockholders.
2. B) cash that is available for dividends.
3. C) cumulative net income that has not been distributed to stockholders as dividends.
4. D) par value of common stock outstanding.

 

20) Additional paid-in capital represents:

1. A) the difference between the total amounts invested by the stockholders and the par or stated value of the stock.
2. B) distributions of earnings that have been made to the stockholders.
3. C) distributions of earnings that have not been made to the stockholders.
4. D) the summation of the total amount invested by the stockholders and the par or stated value of the stock.

 

 

 

21) The Statement of Cash Flows:

1. A) shows how cash changed during the period.
2. B) is an optional financial statement.
3. C) shows the change in the fair value of the entity’s common stock during the period.
4. D) shows the dividends that will be paid in the future.

 

22) On January 31, an entity’s balance sheet showed total assets of $2,250 and liabilities of $750. Stockholders’ equity at January 31 was:

1. A) $1,500
2. B) $3,000
3. C) $1,250
4. D) $750

 

23) On January 31, an entity’s balance sheet showed netassets of $3,075 and liabilities of $675. Stockholders’ equity on January 31 was:

1. A) $2,400
2. B) $3,075
3. C) $3,750
4. D) $675

 

24) At the end of the year, retained earnings totaled $5,100. During the year, net income was $750, and dividends of $360 were declared and paid. Retained earnings at the beginning of the year totaled:

1. A) $6,210
2. B) $3,990
3. C) $3,690
4. D) $4,710

 

25) The balance sheet shows the following accounts and amounts:

 

Cash $13,000; Short-term Debt $21,000; Buildings and Equipment $420,000; Inventory, $44,000; Notes Payable $60,000; Accumulated Depreciation $110,000; Common Stock $80,000; Accounts Receivable $38,000; Retained Earnings $237,000; Accounts Payable $17,000.

 

Total assets on the balance sheet are:

1. A) $367,000
2. B) $405,000
3. C) $515,000
4. D) $625,000

 

 

 

26) The balance sheet shows the following accounts and amounts:

 

Cash $13,000; Short-term Debt $21,000; Buildings and Equipment $420,000; Inventory, $44,000; Notes Payable $60,000; Accumulated Depreciation $110,000; Common Stock $80,000; Accounts Receivable $38,000; Retained Earnings $237,000; Accounts Payable $17,000.

 

Total liabilities on the balance sheet are:

1. A) $77,000
2. B) $98,000
3. C) $178,000
4. D) $208,000

 

27) The balance sheet shows the following accounts and amounts:

 

Inventory, $84,000; Long-term Debt 125,000; Common Stock $60,000; Accounts Payable $44,000; Cash $132,000; Buildings and Equipment $390,000; Short-term Debt $48,000; Accounts Receivable $109,000; Retained Earnings $204,000; Notes Payable $54,000; Accumulated Depreciation $180,000.

 

Total current assets on the balance sheet are:

1. A) $216,000
2. B) $325,000
3. C) $535,000
4. D) $715,000

 

28) The balance sheet shows the following accounts and amounts:

 

Inventory, $84,000; Long-term Debt 125,000; Common Stock $60,000; Accounts Payable $44,000; Cash $132,000; Buildings and Equipment $390,000; Short-term Debt $48,000; Accounts Receivable $109,000; Retained Earnings $204,000; Notes Payable (six-month) $54,000; Accumulated Depreciation $180,000.

 

Total current liabilities on the balance sheet are:

1. A) $98,000
2. B) $146,000
3. C) $271,000
4. D) $326,000

 

29) At the beginning of the fiscal year, the balance sheet showed assets of $2,728 and stockholders’ equity of $1,672. During the year, assets increased $148 and liabilities decreased $76.

 

Stockholders’ equity at the end of the year totaled:

1. A) $1,672
2. B) $1,744
3. C) $1,896
4. D) $2,876

 

30) At the beginning of the fiscal year, the balance sheet showed assets of $2,728 and stockholders’ equity of $1,672. During the year, assets increased $148 and liabilities decreased $76.

 

Liabilities at the end of the year totaled:

1. A) $980
2. B) $1,056
3. C) $1,672
4. D) $1,820

 

31) At the beginning of the year, paid-in capital was $164 and retained earnings was $94. During the year, the stockholders invested $48 and dividends of $12 were declared and paid. Retained earnings at the end of the year were $104.

 

Total stockholders’ equity at the end of the year was:

1. A) $164
2. B) $188
3. C) $212
4. D) $316

 

32) At the beginning of the year, paid-in capital was $164 and retained earnings was $94. During the year, the stockholders invested $48 and dividends of $12 were declared and paid. Retained earnings at the end of the year were $104.

 

Net income for the year was:

1. A) $20
2. B) $22
3. C) $30
4. D) $40

 

33) The going concern concept refers to a presumption that:

1. A) the entity will be profitable in the coming year.
2. B) the entity will not be involved in a merger within a year.
3. C) the entity will continue to operate in the foreseeable future.
4. D) top management of the entity will not change in the coming year.

 

34) Consolidated financial statements report financial position, results of operations, and cash flows for:

1. A) a parent corporation and its subsidiaries.
2. B) a parent corporation alone.
3. C) two corporations that are owned by the same individual.
4. D) a parent corporation and its 100% owned subsidiaries only.

 

 

 

35) A concept or principle that relates to transactions is:

1. A) materiality.
2. B) full disclosure.
3. C) original cost.
4. D) consistency.

 

36) Matching revenues and expenses refers to:

1. A) having revenues equal expenses.
2. B) recording revenues when cash is received.
3. C) accurately reflecting the results of operations for a fiscal period.
4. D) recording revenues when a product is sold or a service is rendered.

 

37) Accrual accounting:

1. A) is designed to match revenues and expenses.
2. B) results in the balance sheet showing the fair value of the entity’s assets.
3. C) means that expenses are recorded when they are paid.
4. D) cannot result in the entity having net income unless cash is received from customers.

 

38) Which of the following accounting methods accomplishes much of the matching of revenues and expenses?

1. A) Match accounting.
2. B) Cash accounting.
3. C) Accrual accounting.
4. D) Full disclosure accounting.

 

39) The principle of consistency means that:

1. A) the accounting methods used by an entity never change.
2. B) the same accounting methods are used by all firms in an industry.
3. C) the effect of any change in an accounting method will be disclosed in the financial statements or notes thereto.
4. D) there are no alternative methods of accounting for the same transaction.

 

40) The principle of full disclosure means that the reporting entity must fully disclose:

1. A) all client data.
2. B) all proprietary information.
3. C) all necessary information to prevent a reasonably astute user of financial statements from being misled.
4. D) all necessary information to prevent all users of financial statements from being misled.

 

41) The balance sheet of an entity:

1. A) shows the fair value of the assets at the date of the balance sheet.
2. B) reflects the impact of inflation on the replacement cost of the assets.
3. C) reports plant and equipment at its opportunity cost.
4. D) shows amounts that are not adjusted for changes in the purchasing power of the dollar.

 

 

 

42) Which of the following is not a limitation of financial statements?

1. A) Financial statements report quantitative economic information; they do not reflect qualitative economic variables.
2. B) The cost principle requires assets to be recorded at their original cost; thus, the balance sheet does not generally reflect the fair values of most assets and liabilities.
3. C) Net income from the income statement is added to the Retained Earnings account balance in the balance sheet.
4. D) Estimates are used in many areas of accounting; when the estimate is made, about the only fact known is that the estimate is probably not equal to the “true” amount.

 

43) Which of the following is not a limitation of financial statements?

1. A) It is possible that two firms operating in the same industry may follow different accounting methods for the exact same transaction.
2. B) Full disclosure requires that the financial statements and notes include all necessary information to prevent a reasonably astute user of the financial statements from being misled.
3. C) Financial statements are not adjusted to show the impact of inflation.
4. D) Financial statements do not reflect opportunity cost, which is an economic concept relating to income forgone because an opportunity to earn income was not pursued.

 

44) Which of the following is not included in a corporation’s annual report?

1. A) The reporting firm’s financial statements for the fiscal year.
2. B) The report of the external auditor’s examination of the financial statements.
3. C) Notes to the financial statements and key financial data for at least the past five years.
4. D) A detailed Management’s Discussion and Analysis section.
5. E) All of the answers are included in a corporation’s annual report.

 

 

 

45) Listed below are a number of financial statement captions. Indicate in the spaces to the right of each caption (1) the category of each item, and (2) the financial statement on which the item can usually be found.

 

Category		FinancialStatement
Asset	A	Balance sheet	BS
Liability	L	Income statement	IS
Stockholders’ Equity	SE
Revenue	R
Expense	E
Gain	G
Loss	LS

 

 

	(1)	(2)
Accounts receivable	________	________
Cost of goods sold	________	________
Retained earnings	________	________
Interest revenue	________	________
Loss on sale of building	________	________
Notes payable	________	________
Additional paid-in capital	________	________
Equipment	________	________
Short-term debt	________	________
General expense	________	________

 

 

 

 

46) Listed below are a number of financial statement captions. Indicate in the spaces to the right of each caption (1) the category of each item, and (2) the financial statement on which the item can usually be found.

 

Category		FinancialStatement
Asset	A	Balance sheet	BS
Liability	L	Income statement	IS
Stockholders’ Equity	SE
Revenue	R
Expense	E
Gain	G
Loss	LS

 

 

Dividends payable	________	________
Selling expenses	________	________
Common stock	________	________
Long-term debt	________	________
Income tax expense	________	________
Gain on sale of land	________	________
Buildings	________	________
Accounts payable	________	________
Merchandise inventory	________	________
Net income	________	________

 

 

47) Listed here are a number of accounts: Merchandise Inventory, Land, Common Stock, Accounts Payable, Insurance Expense, Equipment, Cash, Cost of Goods Sold, Buildings, Retained Earnings, Supplies, Long-term Debt, Sales, Accounts Receivable.

 

Required:

 

Which of the accounts listed above are not assets? How would you categorize each of these nonasset accounts?

 

48) Total assets were $24,000 and total liabilities were $13,500 at the beginning of the year. Net income for the year was $4,000, and dividends of $1,500 were declared and paid during the year.

 

Required:

 

Calculate total stockholders’ equity at the end of the year.

 

 

 

49) Stockholders’ equity totaled $41,000 at the beginning of the year. During the year, net income was $6,000, dividends of $1,500 were declared and paid, and $5,000 of common stock was issued at par value.

 

Required:

 

Calculate total stockholders’ equity at the end of the year.

 

50) During the year, net sales were $750,000; gross profit was $300,000; net income was $120,000; income tax expense was $30,000; and selling, general, and administrative expenses were $132,000.

 

Required:

 

Calculate cost of goods sold, income from operations, income before taxes, and interest expense.

 

51) During the year, cost of goods sold was $320,000; income from operations was $304,000; income tax expense was $64,000; interest expense was $48,000; and selling, general, and administrative expenses were $176,000.

 

Required:

 

Calculate net sales, gross profit, income before taxes, and net income.

 

52) From the data given below, calculate the Retained Earnings balance of December 31, 2019.

 

Retained earnings, December 31, 2020	$	345,000
Increase in total liabilities during 2020		99,000
Gain on the sale of buildings during 2020		42,000
Dividends declared and paid in 2020		27,000
Proceeds from sale of common stock in 2020		96,000
Net income for the year ended December 31, 2020		123,000

 

 

53) From the data given below, calculate the Retained Earnings balance as of December 31, 2020.

 

Retained earnings, December 31, 2019	$	840,000
Cost of equipment purchased during 2020		250,000
Net loss for the year ended December 31, 2020		86,000
Dividends declared and paid in 2020		110,000
Decrease in cash balance from January 1, 2020, to December 31, 2020		24,000
Decrease in long-term debt in 2020		134,000

 

 

 

 

54) Volunteer, Inc. is in the process of liquidating and going out of business. The firm has $69,820 in cash, inventory totaling $214,000, accounts receivable of $144,000, plant and equipment with a $384,000 book value, and total liabilities of $614,000. It is estimated that the inventory can be disposed of in a liquidation sale for 75% of its cost, all but 15% of the accounts receivable can be collected, and plant and equipment can be sold for $420,000.

 

(a.) Calculate the amount of cash that would be available to the stockholders if the accounts receivable are collected, the other assets are sold as described, and the liabilities are paid in full.

 

(b.) Describe how the difference between book value and liquidation value would be treated on the final income statement for Volunteer, Inc. with respect to the following assets: inventory, accounts receivable, and plant and equipment. What income statement accounts would be affected when these assets are sold or collected as described above?

 

55) Ann Kimber is thinking about going out of business and retiring. Her firm has $50,000 in cash, other assets totaling $71,400, and total liabilities of $51,000. The other assets can be sold for an estimated $68,000 cash in a liquidation sale. Calculate the amount of cash that would be available upon Ann’s retirement if the other assets were sold and the liabilities were paid.

 

 

 

56) Presented below is a statement of cash flows for Plum, Inc., for the year ended December 31, 2020. Also shown is a partially completed comparative balance sheet as of December 31, 2020 and 2019.

 

PLUM, INC.
Statement of Cash Flows
For the year ended December 31, 2020
Cash flows from operating activities:
Net income	$	27,000
Add (deduct) items not affecting cash:
Depreciation expense		135,000
Decrease in accounts receivable		69,000
Increase in inventory		(21,000	)
Increase in short-term debt		15,000
Increase in notes payable		36,000
Decrease in accounts payable		(18,000	)
Net cash provided by operating activities	$	243,000
Cash flows from investing activities:
Purchase of equipment	$	(150,000	)
Purchase of buildings		(144,000	)
Net cash used by investing activities		(294,000	)
Cash flows from financing activities:
Cash used for retirement of long-term debt	$	(75,000	)
Proceeds from issuance of common stock		30,000
Payment of cash dividends on common stock		(9,000	)
Net cash used by financing activities		(54,000	)
Net decrease in cash for the year	$	(105,000	)

 

 

 

 

PLUM, INC.
Balance Sheets
December 31, 2020, and 2019
	2020			2019
Assets
Current assets:
Cash	$				$	264,000
Accounts receivable						219,000
Inventory		168,000
Total current assets	$				$
Land						120,000
Buildings and Equipment		780,000
Less: Accumulated depreciation						(369,000	)
Total land, buildings and equipment
Total assets	$				$
Liabilities
Current liabilities:
Short-term debt	$	96,000			$
Notes payable						108,000
Accounts payable						87,000
Total current liabilities	$				$
Long-term debt		255,000
Stockholders’ Equity
Common stock	$	120,000
Retained earnings
Total stockholders’ equity	$				$
Total liabilities and stockholders’ equity	$				$

 

 

Required:

 

(a.) Complete the December 31, 2020 and 2019 balance sheets.

(b.) Prepare a Statement of Changes in Retained Earnings for the year ended December 31, 2020.

 

Accounting – What the Numbers Mean, 12e (Marshall)

Chapter 4   The Bookkeeping Process and Transaction Analysis

 

1) An expanded version of the accounting equation could be:

1. A) Assets + Revenues = Liabilities + Stockholders’ Equity − Expenses
2. B) Assets − Liabilities = Paid-in Capital − Revenues − Expenses
3. C) Assets = Liabilities + Paid-in Capital + Beginning Retained Earnings + Revenues − Expenses − Dividends
4. D) Assets = Liabilities + Paid-in Capital − Revenues + Expenses

 

2) In the seller’s records, the sale of merchandise on account would:

1. A) increase assets and increase expenses.
2. B) increase assets and decrease liabilities.
3. C) increase assets and increase paid-in capital.
4. D) increase assets and decrease revenues.

 

3) In an advertiser’s records, a newspaper ad submitted and published this week with the agreement to pay for it next week would:

1. A) decrease assets and decrease expenses.
2. B) increase liabilities and increase expenses.
3. C) decrease assets and increase revenue.
4. D) increase assets and decrease liabilities.

 

4) In the buyer’s records, the purchase of merchandise on account would:

1. A) increase assets and increase expenses.
2. B) increase assets and increase liabilities.
3. C) increase liabilities and increase paid-in capital.
4. D) have no effect on total assets.

 

5) A newspaper ad submitted and published this week, with the agreement to get paid for it next week would, in the newspaper’s records:

1. A) increase assets and increase revenues.
2. B) increase assets and decrease liabilities.
3. C) increase assets and increase expenses.
4. D) have no effect on total assets.

 

6) A debit entry will:

1. A) decrease an asset account.
2. B) increase a liability account.
3. C) increase paid-in capital.
4. D) increase an expense account.

 

 

 

7) A credit entry will:

1. A) increase an asset account.
2. B) increase a liability account.
3. C) decrease paid-in capital.
4. D) increase an expense account.

 

8) A credit entry will:

1. A) always decrease the account balance.
2. B) always increase the account balance.
3. C) increase the balance of a revenue account.
4. D) increase the balance of an expense account.

 

9) A debit entry will:

1. A) always decrease the account balance.
2. B) always increase the account balance.
3. C) increase the balance of a revenue account.
4. D) increase the balance of an expense account.

 

10) Chicago Consulting, an engineering consulting firm, provided $6,000 of services to a client; the client paid $2,000 when the bill was submitted and will pay the balance within a week. Chicago Consulting will record this transaction by:

A)

Dr.	Cash	2,000
Dr.	Fees receivable	4,000
Cr.	Fees revenue		6,000

 

B)

Dr.	Fees revenue	6,000
Cr.	Fees receivable		4,000
Cr.	Cash		2,000

 

C)

Dr.	Cash	2,000
Cr.	Fees revenue		2,000

 

D)

Dr.	Cash	2,000
Dr.	Fees revenue	4,000
Cr.	Fees receivable		6,000

 

 

 

 

11) To accrue $7,100 of employee salaries for the last week of February, the employer’s journal entry is:

A)

Dr.	Salaries expense	7,100
Cr.	Cash		7,100

 

B)

Dr.	Salaries expense	7,100
Cr.	Salaries payable		7,100

 

C)

Dr.	Salaries payable	7,100
Cr.	Cash		7,100

 

D)

Dr.	Salaries expense	7,100
Cr.	Fee revenue		7,100

 

 

12) Alpha Bot Industries has 30 employees who work Monday through Friday each week; each employee earns $150 per day and is paid every Friday. The end of the accounting period is on a Tuesday. How much wages expense should the firm accrue at the end of the period?

1. A) $4,500
2. B) $6,000
3. C) $0
4. D) $9,000

 

13) Which of the following is not one of the 5 questions of transaction analysis?

1. A) What’s going on?
2. B) Which accounts are affected?
3. C) Is this an accrual?
4. D) Does the balance sheet balance?
5. E) Does my analysis make sense?

 

14) The effect of an adjustment is:

1. A) to correct an entry that was not in balance.
2. B) to increase the accuracy of the financial statements.
3. C) to record cash receipts and payments not previously recorded.
4. D) to close the books.

 

15) An adjusting journal entry recording an accrual:

1. A) results in a better matching of revenues and expenses.
2. B) will involve a debit or credit to cash.
3. C) will affect balance sheet accounts only.
4. D) will most likely include a debit to a liability account.

 

16) Wisdom Co. has a note payable to its bank. An adjustment is likely to be required on Wisdom’s books at the end of every month that the loan is outstanding to record the:

1. A) amount of interest paid during the month.
2. B) amount of total interest to be paid when the note is paid off.
3. C) amount of principal payable at the maturity date of the note.
4. D) accrued interest expense for the month.

 

17) Unquiet Hands, Inc. borrowed $30,000 on October 1, 2019 at 6% interest with both principal and interest due on September 30, 2020. Which of the following journal entries should the firm use to accrue interest at the end of each month?

A)

Dr.	Interest payable
Cr.	Cash

 

B)

Dr.	Interest receivable
Cr.	Interest payable

 

C)

Dr.	Interest expense
Cr.	Interest payable

 

D)

Dr.	Interest payable
Cr.	Interest expense

 

 

18) Unquiet Hands, Inc. borrowed $30,000 on October 1, 2019 at 6% interest with both principal and interest due on September 30, 2020. How much should be in Unquiet Hands, Inc.’s interest payable account at December 31, 2019?

1. A) $450
2. B) $1,800
3. C) $0
4. D) $1,350

 

 

 

19) Unquiet Hands, Inc. borrowed $30,000 on October 1, 2019 at 6% interest with both principal and interest due on September 30, 2020. Which of the following journal entries should Unquiet Hands, Inc. use to record the payment of interest on September 30, 2020?

A)

Dr.	Interest payable
Cr.	Cash

 

B)

Dr.	Interest receivable
Cr.	Interest payable

 

C)

Dr.	Interest expense
Cr.	Interest payable

 

D)

Dr.	Interest payable
Cr.	Interest expense

 

20) The accountant at WooSah! USA made an adjusting entry at the end of February to accrue interest on a note receivable from a customer. The effect of this entry is to:

1. A) decrease ROI for February.
2. B) increase ROI for February.
3. C) decrease working capital at February 28.
4. D) decrease the acid-test ratio at February 28.

 

21) The accounting concept/principle being applied when an adjustment is made is usually:

1. A) matching revenue and expense.
2. B) consistency.
3. C) original cost.
4. D) materiality.

 

22) The balance in the Wages Payable account increased from $13,000 at the beginning of the month to $20,000 at the end of the month. Wages accrued during the month totaled $82,000.

1. A) Wages paid during the month totaled $75,000.
2. B) Wages paid during the month totaled $89,000.
3. C) Wages expense for the month totaled $75,000.
4. D) Wages expense for the month totaled $89,000.

 

23) The balance in the Wages Payable account was $25,000 at the beginning of the month. Wages accrued during the month totaled $54,000. Wages paid during the month were $63,000.

1. A) The balance of the Wages Payable account at the end of the month was $16,000.
2. B) The balance of the Wages Payable account at the end of the month was $34,000.
3. C) Wages expense for the month totaled $63,000.
4. D) Wages expense for the month totaled $79,000.

 

24) The balance in the Accounts Receivable account decreased from $18,000 at the beginning of the month to $15,000 at the end of the month. Sales on account during the month totaled $130,000. No accounts receivable were written off as uncollectible during the month. Cash collections of accounts receivable during the month totaled:

1. A) $127,000.
2. B) $130,000.
3. C) $133,000.
4. D) $145,000.

 

25) Sales on account during the month totaled $78,000. Cash collections of accounts receivable during the month totaled $72,000. The balance in the Accounts Receivable account at the end of the month was $31,000. No accounts receivable were written off as uncollectible during the month. The balance in the Accounts Receivable account at the beginning of the month was:

1. A) $25,000.
2. B) $31,000.
3. C) $37,000.
4. D) $43,000.

 

26) When a firm purchases supplies for use in its business, and the cost of the supplies purchased is recorded as an asset, the following adjustment to recognize the cost of supplies used will probably be required:

A)

Dr.	Supplies
Cr.	Accounts payable

 

B)

Dr.	Supplies
Cr.	Supplies expense

 

C)

Dr.	Supplies expense
Cr.	Supplies

 

1. D) No adjustment will probably be required.

 

27) When a firm purchases supplies for its business:

1. A) the supplies account should always be debited.
2. B) the supplies expense account should always be debited.
3. C) either the supplies account or the supplies expense account should be credited.
4. D) an adjustment will probably be required as supplies are used.

 

28) The effect of an adjustment on the financial statements is usually to:

1. A) make the balance sheet balance.
2. B) increase net income.
3. C) increase the accuracy of both the balance sheet and income statement.
4. D) match revenues and assets.

 

29) A journal:

1. A) is where transactions are initially recorded.
2. B) is where transactions are posted to after they are initially recorded.
3. C) serves as an index to the ledger.
4. D) is the same as a source document, such as an invoice from a supplier or a copy of a credit purchase made by a customer.

 

30) A ledger:

1. A) is where transactions are initially recorded.
2. B) is where transactions are posted to after they are initially recorded.
3. C) is the same as a chart of accounts, with each account numbered to facilitate frequent references that are made to it.
4. D) is the same as a source document, such as an invoice from a supplier or a copy of a credit purchase made by a customer.

 

31) A chart of accounts:

1. A) is where transactions are initially recorded.
2. B) is where transactions are posted to after they are initially recorded.
3. C) serves as an index to the ledger, with each account numbered to facilitate frequent references that are made to it.
4. D) is the same as a T-account, with debits on the left and credits on the right.

 

32) At the beginning of the current fiscal year, Mindspin Lab’s balance sheet showed assets of $1,350,000 and liabilities of $1,050,000. During the year, liabilities decreased by $70,000. Net Income for the year was $350,000, and net assets at the end of the year were $386,000. There were no changes in paid-in capital during the year.

 

Calculate the dividends, if any, declared during the year.

Calculate the total assets at the end of the year.

 

33) At the beginning of the current fiscal year, the balance sheet of Mondrop Co. showed liabilities of $760,000. During the year liabilities increased by $20,000, assets increased by $110,000, and paid-in capital increased by $40,000 to $330,000. Dividends declared and paid during the year were $120,000. At the end of the year, stockholders’ equity totaled $804,000. Calculate net income or loss for the year.

 

 

 

34) Using the column headings provided below, show the effect, if any, of the transaction entry or adjusting entry on the appropriate balance sheet category or on the income statement by entering the account name, amount, and indicating whether it is an addition (+) or subtraction (−). Column headings reflect the expanded balance sheet equation; items that affect net income should not be shown as affecting stockholders’ equity.

 

1. The firm borrowed $4,000 from the bank; a short-term note was signed.
2. Merchandise inventory costing $1,500 was purchased; cash of $400 was

paid and the balance is due in 30 days.

3. Employee wages of $2,000 were accrued at the end of the month.
4. Merchandise that cost $700 was sold for $900 in cash.
5. This month’s rent of $1,400 was paid.
6. Revenues from services during month totaled $13,000. Of this amount,

$4,000 was received in cash and the balance is expected to be received within 30 days.

7. During the month, supplies were purchased on account at a cost of $1,040,

and debited into the Supplies (asset) account. A total of $800 of supplies

were used during the month.

8. Interest of $480 has been earned on a note receivable, but has not yet been received.

 

Transaction/ Adjustment	Assets	Liabilities	Stockholders’Equity	NetIncome
1.
2.
3.
4.
5.
6.
7.
8.

 

35) Using the column headings provided below, show the effect, if any, of the transaction entry or adjusting entry on the appropriate balance sheet category or on the income statement by entering the account name, amount, and indicating whether it is an addition (+) or subtraction (−). Column headings reflect the expanded balance sheet equation; items that affect net income should not be shown as affecting stockholders’ equity.

 

1. During the month, the board of directors declared a cash dividend of $2,400,

payable next month.

2. Employees were paid $3,800 in wages for their work during the first three

weeks of the month.

3. Employee wages of $1,200 for the last week of the month have not been recorded.

 

4. Merchandise that cost $1,800 was sold for $2,700. Of this amount, $2,000 was

received in cash and the balance is expected to be received within 30 days.

5. A contract was signed with a local radio station for a $200 advertisement;

the ad was aired during this month but will not be paid for until next month.

6. Store equipment was purchased at a cash price of $600. The original

list price of the equipment was $800, but a discount was received.

7. Received $360 of interest revenue for the current month.
8. Accrued $620 of interest expense at the end of the month.

 

Transaction/Adjustment	Assets	Liabilities	Stockholders’ Equity	Net Income
1.
2.
3.
4.
5.
6.
7.
8.