acct

An entry made to the left side of an account is a:

debit

What is the normal balance of a liability account?

credit

The costs of doing business are known as:

expenses

The process of recording transactions is called:

journalizing

If Larson Inc. has an account receivable from a customer, then...

Larkin Inc. has the right to receive from the customer.

If total assets were $75,000 and total liabilities were $30,000, then stockholders' equity was:

$45,000

What is the sequence of the trial balance? (6 total)

1. assets
2. liabilities
3. contributed capital
4. dividends
5. revenues
6. expenses

(***Remember: ALC-DRE***)

Which of the following statements does **not** describe a trial balance?

\
a) A trial balance displays both gross profit and net income.

b) A trial balance is a list of all account names and balances in proper order.

c) A trial balance is used to prove the equality of debits and credits.

d) A trial balance is prepared before the financial statements.

a

\
(A trial balance does **not** display both gross profit and net income.)

Selected information from a trial balance is presented below. Which of the following would require investigation? \n \n a) accounts receivable --> debited \n b) accounts payable --> credited \n c) sales revenue --> debited \n d) wages expense --> debited

c \n \n (Sales revenue should be CREDITED.)

The financial statement that lists revenues and expenses is referred to as the:

income statement

On April 4, Jackson Company purchased equipment **on account** for $500. The journal entry required for this transaction is...

debit equipment and credit accounts payable for $500

If the business has an account receivable from a customer, then the customer has what for the business?

account payable

The organization primarily responsible for setting accounting principles is:

FASB (Financial Accounting Standards Board)

What is the primary objective of financial reporting?

provide information for decision making

The accrual basis of accounting recognizes revenue when _____, and expenses when...

earned; the costs are incurred

Bilton Inc. operates a catering service. Bilton Inc. uses an accrual accounting system and will recognize revenue when...

Bilton caters the meal

Accrued salaries as of December 31, 2019 were $5,000. Salaries of $6,000 were paid on January 3. The adjusting entry for December 31, 2019 would be...

**debit** salaries **expense** for $5,000

**credit** salaries **payable** for $5,000

\
**(AS OF DECEMBER 31)**

(Doesn't matter what they pay in January)

Which of the following accounts is **not** classified as a current liability?

\
a) taxes payable

b) accounts payable

c) salaries payable

d) all of the above are current liabilities

d) all of the above are current liabilities

Closing entries result in revenues, expenses, and dividends being transferred to what account?

retained earnings

Monumental Toys sold merchandise to a customer on credit. See data below.

\
Invoice Amount: **$1,200**

Invoice Date: **June 7**

Terms: **3/15, n/30**

\
Which one of the following statements is **true**?

\
**a)** The customer can take a $180 discount if the invoice is paid by June 10.

**b)** The customer should pay $1,164 if the invoice is paid by June 22.

**c)** The customer must pay a $36 penalty if payment is made after June 30.

**d)** The customer should $1,380 if payment is made after July 6.

b) The customer should pay $1, 164 if the invoice is paid by June 22

Merchandise inventory held by a business is a(n) _____ and when sold becomes a(n) _____.

asset; expense

Which one of the following accounts most likely would appear on the income statement of a merchandising corporation, but not on the income statement of a service corporation? \n \n a) cost of goods sold expense \n b) depreciation expense \n c) salaries expense \n d) interest expense

a (cost of goods sold expense)

Austin Inc.’s trial balance as of December 31, 2020, is provided below. What is Austin Inc.’s gross profit for the year ended December 31, 2020?

$11,950

Austin Inc.’s trial balance as of December 31, 2020, is provided below.

What is Austin Inc.’s net income for the year ended December 31, 2020?

b) 1,600

Jerry's Ice Cream Company had a beginning inventory of $2,000 on May 1. The company purchased additional inventory costing $30,000 during the month. At the end of the month, the inventory balance was $3,300. What is the cost of goods sold for May?

$28,700

At the year-end inventory count, if goods in transit are shipped FOB shipping point, they are included in the inventory count of:

the buyer

Panama Inc. sells hats. Ideally, the cost of goods sold would be _____ than the sales revenue.

lower

Gymco Company made a sale for $2,000. The invoice that Gymco sent its customer in ....?.... the merchandise selling price of $2,000, 7% sales tax, and $400 shipping. How much will be credited to sales revenue?

$2,540

When the LIFO method is used, ending inventory is assumed to consist of the...

**oldest** per-unit costs

During a period of rising prices, net income would be _____ using LIFO compared to FIFO

lower

The Specific Identification method of inventory costing/valuation would most likely be used to account for: \n \n a) cartons of milk at a grocery store \n b) gasoline in the storage tanks at the gas station \n c) automobiles at the car dealership \n d) bottles of water at an amusement park

c \n \n (automobiles at the car dealership

Which one of the following statements regarding internal control is **true**?

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**a)** Companies can design a system of internal control that is foolproof.

**b)** The integrity of a company's employees is not important because internal controls will always detect employee fraud.

**c)** Separation of duties is an example of an internal control that a small company might not be able to afford.

**d)** Internal controls should be implemented even if the costs of the controls outweigh the benefits.

c \n \n (Separation of duties is an example of an internal control that a small company might not be able to afford.)

In a bank reconciliation, the outstanding checks are...

**deducted** from **BANK** statement balance

Which of the following statements about accounting for bad debt is **false**?

\
**a)** GAAP requires an account receivable to be recorded as bad debt expense when.....determines the account will be uncollectible.

**b)** The allowance method is required by GAAP.

**c)** The allowance method requires the use of a contra-asset account to indirectly decrease accounts receivable.

**d)** The allowance method requires that bad debt expense be estimated for the accounting period.

a) GAAP requires an account receivable to be recorded as bad debt expense when.....determines the account will be uncollectible.

The following information is available from the accounting records of Elvis Corporation for 2020.

\
Credit Sales during the year: $700,000

Accounts Receivable (12/31/2020): $365,000

Allowance for Doubtful Accounts (12/31/2020): $47,000

Bad debt expense for the year: $27,000

\
What amount will Elvis Corporation show on its year-end balance sheet for the net realizable value of its accounts receivable?

b) $318,000

Which of the following payroll taxes would **not** be deducted from an employee's earnings?

\
a) FUTA

b) FICA

c) state income tax

d) federal income tax

a) FUTA

Teng Inc. issued a **$30,000, 8% 5-month note** on **November 1**, 2019. How much interest should Teng accrue on **December 31**, 2019?

$400

\
**(30,000 x .08 x 2/12 = 400)**

(Solve for 2 months - not 5)

A business reports $250,000 for equipment and $150,000 for accumulated depreciation on equipment. What is the **BOOK value** of the equipment?

$100,000

\
(**Formula for Book Value:** cost - accum. dep.)

(250,000 - 150,000 = 100,000)

A business reports $250,000 for equipment and $150,000 for accumulated depreciation on equipment on its balance sheet. What is the **fair market value** of the equipment?

cannot be determined \n \n (We can only solve for the cost, accumulated depreciation, and BOOK value.)

In an accounting context, **depreciation** is a process by which...

the cost of plant and equipment is recorded as an expense over the asset's useful life

Equipment with a cost of **$130,000** has an estimated residual value of **$30,000** and a useful life of **5 years**. Using straight-line depreciation, what is the depreciation expense for the full **first year**?

$20,000 (for YEAR 1)

\
(Cost - Salvage value / Useful life)

(**130,000 - 30,000 / 5**)

XYZ Company sold a machine for **$5,500**. The machine cost **$13,500** and had an accumulated depreciation of **$7,200** at the time of sale. What **gain or loss** would be reported on the income statement after they sold the machine?

loss of $800

\
(Cost - Accum. Dep. = Book Value)

**($13,500 - $7,200 = $6,300)**

\
(Book Value - amount it was sold for = gain/loss)

**($6,300 - $5,500 = $800 LOSS)**

If current assets amount to $400, total assets $950, current liabilities $210, and total liabilities $300, then the **current ratio** is: _____ to _____

1\.90 to 1

\
(Current Ratio = **current** assets / **current** liabilities)

(400/210)

Which of the following statements is **true** with respect to long-term liabilities?

\
a) Accumulated depreciation is a long-term liability.

b) An accounts payable is a good example of a long-term liability because it is interest-bearing.

c) Long-term liabilities may include bonds and notes payable.

d) Accrued expenses are considered to be long-term liabilities.

c \n \n (Long-term liabilities may include bonds and notes payable.)

On March 1, 2020, Arlington Inc. issued **$50,000, 7%,** **5-year bonds**. Interest is paid __***semi-annually***__. The market interest on March 1 is 8%. How much is each interest payment?

**$1,750**

\
(Don't care about 8% market interest. Only 7%)

\
**(50,000 x .07 = 3,500)**

\
(Interest is paid semi-annually --> paid twice a year)

\
(3,500 is the interest for the *whole* year, so now divide by 2)

\
**(3,500 / 2 = 1,750)**

...... is an arbitrary amount that exists to fulfill legal requirements.

par value

Why would a stockholder want to invest in preferred stock?

Preferred stock dividends are paid before common stock dividends are paid.

CLD issues 5,000 shares of $1 par common stock for $30. Providing the company with $150,000 in cash. What effects does this have on the accounting equation for CLD?

**common stock** __increases__ by **$5,000**

**additional paid-in capital** __increases__ by **$145,000**

\#'s 48-58 - Letter Answers?

48\. B \n 49. D \n 50. A \n 51. D \n 52. B \n 53. C \n 54. D \n 55. B \n 56. C \n 57. A \n 58. C