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51. Cost of goods sold is determined only at the end of the

Resolved Question:

51. Cost of goods sold is determined only at the end of the accounting period in
a. a perpetual inventory system.
b. a periodic inventory system.
c. both a perpetual and a periodic inventory system.
d. neither a perpetual nor a periodic inventory system.

52. Which of the following expressions is incorrect?
a. Gross profit – operating expenses = operating income
b. Sales – cost of goods sold – operating expenses = operating income
c. Operating income + operating expenses = gross profit
d. Operating expenses – cost of goods sold = gross profit

53. Detailed records of goods held for resale are not maintained under a
a. perpetual inventory system.
b. periodic inventory system.
c. double entry accounting system.
d. single entry accounting system.

54. A perpetual inventory system would likely be used by a(n)
a. automobile dealership.
b. hardware store.
c. drugstore.
d. convenience store.
Chapter 6 – Multiple Choice Questions:
55. The factor which determines whether or not goods should be included in a physical count of inventory is
a. physical possession.
b. legal title.
c. management's judgment.
d. whether or not the purchase price has been paid.

Chapter 9 – Multiple Choice Questions:
56. If a company fails to record estimated bad debts expense,
a. cash realizable value is understated.
b. expenses are understated.
c. revenues are understated.
d. receivables are understated.

57. Janway Company sells softball equipment. On November 14, they shipped $1,000 worth of softball uniforms to Chris Middle School, terms 2/10, n/30. On November 21, they received an order from Douglas High School for $600 worth of custom printed bats to be produced in December. On November 30, Chris Middle School returned $100 of defective merchandise. Janway has received no payments from either school as of month end. What amount will be recognized as net accounts receivable on the Balance Sheet as of November 30?
a. $1,600
b. $1,500
c. $1,000
d. $900

58. Larson Company on July 15 sells merchandise on account to Stuart Co. for $1,000, terms 2/10, n/30. On July 20 Stuart Co. returns merchandise worth $400 to Larson Company. On July 24 payment is received from Stuart Co. for the balance due. What is the amount of cash received?
a. $600
b. $588
c. $580
d. $1,000

59. The existing balance in Allowance for Doubtful Accounts is considered in computing bad debts expense in the
a. direct write-off method.
b. percentage of receivables basis.
c. percentage of sales basis.
d. percentage of receivables and percentage of sales basis.

60. When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when
a. a sale is made.
b. an account becomes bad and is written off.
c. management estimates the amount of uncollectibles.
d. a customer's account becomes past-due.


61. 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 Debts Expense should be credited.
d. Sales should be debited.

62. The collection of an account that had been previously written off under the allowance method of accounting for uncollectibles
a. will increase income in the period it is collected.
b. will decrease income in the period it is collected.
c. requires a correcting entry for the period in which the account was written off.
d. does not affect income in the period it is collected.


63. The percentage of sales basis of estimating expected uncollectibles
a. emphasizes the matching of expenses with revenues.
b. emphasizes balance sheet relationships.
c. emphasizes cash realizable value.
d. is not generally accepted as a basis for estimating bad debts.

64. An aging of a company's accounts receivable indicates that $9,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,100 credit balance, the adjustment to record bad debts for the period will require a
a. debit to Bad Debts Expense for $9,000.
b. debit to Allowance for Doubtful Accounts for $7,900.
c. debit to Bad Debts Expense for $7,900.
d. credit to Allowance for Doubtful Accounts for $9,000.

65. A debit balance in the Allowance for Doubtful Accounts
a. is the normal balance for that account.
b. indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.
c. indicates that actual bad debt write-offs have been less than what was estimated.
d. cannot occur if the percentage of sales method of estimating bad debts is used.

66. Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited
a. when a credit sale is past due.
b. at the end of each accounting period.
c. whenever a pre-determined amount of credit sales have been made.
d. when an account is determined to be uncollectible.

67. An alternative name for Bad Debts Expense is
a. Deadbeat Expense.
b. Uncollectible Accounts Expense.
c. Collection Expense.
d. Credit Loss Expense.

68. A reasonable amount of uncollectible accounts is evidence
a. that the credit policy is too strict.
b. that the credit policy is too lenient.
c. of a sound credit policy.
d. of poor judgments on the part of the credit manager.
Chapter 10 – Multiple Choice Questions:
69. A company purchases a remote site building for computer operations. The building will be suitable for operations after some expenditures. The wiring must be replaced to computer specifications. The roof is leaky and must be replaced. All rooms must be repainted and recarpeted and there will also be some plumbing work done. Which of the following statements is true?
a. The cost of the building will not include the repainting and recarpeting costs.
b. The cost of the building will include the cost of replacing the roof.
c. The cost of the building is the purchase price of the building, while the additional expenditures are all capitalized as Building Improvements.
d. The wiring is part of the computer costs, not the building cost.
70. Carley Company purchases a new delivery truck for $45,000. The sales taxes are $3,000. The logo of the company is painted on the side of the truck for $1,200. The truck license is $120. The truck undergoes safety testing for $220. What does Carley record as the cost of the new truck?
a. $49,540
b. $49,420
c. $48,000
d. $47,420

71. All of the following factors in computing depreciation are estimates except
a. cost.
b. residual value.
c. salvage value.
d. useful life.

72. Stories Company purchased equipment and these costs were incurred:
Cash price $22,500
Sales taxes 1,800
Insurance during transit 320
Installation and testing 430
Total costs $25,050

Stories will record the acquisition cost of the equipment as:
a. $22,500.
b. $24,300.
c. $24,620.
d. $25,050.

Chapter 11 – Multiple Choice Questions:
73. Interest expense on an interest-bearing note is
a. always equal to zero.
b. accrued over the life of the note.
c. only recorded at the time the note is issued.
d. only recorded at maturity when the note is paid.

74. The entry to record the payment of an interest-bearing note at maturity after all interest expense has been recognized is
a. Notes Payable
Interest Payable
Cash
b. Notes Payable
Interest Expense
Cash
c. Notes Payable
Cash
d. Notes Payable
Cash
Interest Payable

75. Sales taxes collected by a retailer are recorded by
a. crediting Sales Taxes Revenue.
b. debiting Sales Taxes Expense.
c. crediting Sales Taxes Payable.
d. debiting Sales Taxes Payable.

76. Unearned Rental Revenue is
a. a contra account to Rental Revenue.
b. a revenue account.
c. reported as a current liability.
d. debited when rent is received in advance.

77. Sales taxes collected by the retailer are recorded as a(n)
a. revenue.
b. liability.
c. expense.
d. asset.

Use the following information for questions 78–79.

On September 1, Ken's Painting Service borrows $50,000 from National Bank on a 4-month, $50,000, 6% note.

78. What entry must Ken's Painting Service make on December 31 before financial statements are prepared?
a. Interest Payable 1,000
Interest Expense 1,000
b. Interest Expense 3,000
Interest Payable 3,000
c. Interest Expense 1,000
Interest Payable 1,000
d. Interest Expense 1,000
Notes Payable 1,000

79. The entry by Ken's Painting Service to record payment of the note and accrued interest on January 1 is
a. Notes Payable 51,000
Cash 51,000
b. Notes Payable 50,000
Interest Payable 1,000
Cash 51,000
c. Notes Payable 50,000
Interest Payable 3,000
Cash 53,000
d. Notes Payable 50,000
Interest Expense 1,000
Cash 51,000

80. The interest charged on a $100,000 note payable, at the rate of 8%, on a 90-day note would be
a. $8,000.
b. $4,444.
c. $2,000.
d. $667.
Chapter 12 – Multiple Choice Questions:
81. If Vickers Company issues 2,000 shares of $5 par value common stock for $140,000,
a. Common Stock will be credited for $140,000.
b. Paid-In Capital in Excess of Par Value will be credited for $10,000.
c. Paid-In Capital in Excess of Par Value will be credited for $130,000.
d. Cash will be debited for $130,000.

82. If common stock is issued for an amount greater than par value, the excess should be credited to
a. Cash.
b. Retained Earnings.
c. Paid-in Capital in Excess of Par Value.
d. Legal Capital.

83. If stock is issued for a noncash asset, the asset should be recorded on the books of the corporation at
a. fair market value.
b. cost.
c. zero.
d. a nominal amount.

84. If stock is issued for less than par value, the account
a. Paid-In Capital in Excess of Par Value is credited.
b. Paid-In Capital in Excess of Par Value is debited if a debit balance exists in the account.
c. Paid-In Capital in Excess of Par Value is debited if a credit balance exists in the account.
d. Retained Earnings is credited.

85. The sale of common stock below par
a. is a common occurrence in most states.
b. is not permitted in most states.
c. is a practice that most shareholders encourage.
d. requires that a liability be recorded for the difference between the sales price and the par value of the shares.

86. Paid-In Capital in Excess of Stated Value
a. is credited when no-par stock does not have a stated value.
b. is reported as part of paid-in capital on the balance sheet.
c. represents the amount of legal capital.
d. normally has a debit balance.

87. A separate paid-in capital account is used to record each of the following except the issuance of
a. no-par stock.
b. par value stock.
c. stated value stock.
d. treasury stock above cost.

88. Becker Company is a publicly held corporation whose $1 par value stock is actively traded at $20 per share. The company issued 2,000 shares of stock to acquire land recently advertised at $50,000. When recording this transaction, Becker Company will
a. debit Land for $50,000.
b. credit Common Stock for $40,000.
c. debit Land for $40,000.
d. credit Paid-In Capital in Excess of Par Value for $48,000.

89. Simon Company issued 6,000 shares of its $5 par value common stock in payment of its attorney's bill of $45,000. The bill was for services performed in helping the company incorporate. Simon should record this transaction by debiting
a. Legal Expense for $30,000.
b. Legal Expense for $45,000.
c. Organization Expense for $30,000.
d. Organization Expense for $45,000.

90. In the financial statements, organization costs appears
a. immediately below Retained Earnings in the stockholders' equity section.
b. in the income statement.
c. as part of paid-in capital in the stockholders' equity section.
d. as an intangible asset.

Chapter 14 – Multiple Choice Questions:
91. Each of the following is added to net income in computing net cash provided by operating activities except
a. amortization expense.
b. an increase in accrued expenses payable.
c. a gain on sale of equipment.
d. a decrease in inventory.

92. Which of the following would be subtracted from net income using the indirect method?
a. Depreciation expense
b. An increase in accounts receivable
c. An increase in accounts payable
d. A decrease in prepaid expenses

93. Which of the following would be added to net income using the indirect method?
a. An increase in accounts receivable
b. An increase in prepaid expenses
c. Depreciation expense
d. A decrease in accounts payable

94. Which of the following would not be an adjustment to net income using the indirect method?
a. Depreciation Expense
b. An increase in Prepaid Insurance
c. Amortization Expense
d. An increase in Land

95. In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as a(n)
a. subtraction from net income.
b. addition to net income.
c. addition to cash flow from investing activities.
d. subtraction from cash flow from investing activities.

96. Which of the following adjustments to convert net income to net cash provided by operating activities is correct?
Add to Net Income Deduct from Net Income
a. Accounts Receivable increase decrease
b. Prepaid Expenses increase decrease
c. Inventory decrease increase
d. Taxes Payable decrease increase

97. Which of the following adjustments to convert net income to net cash provided by operating activities is incorrect?
Add to Net Income Deduct from Net Income
a. Accounts Receivable decrease increase
b. Prepaid Expenses increase decrease
c. Inventory decrease increase
d. Accounts Payable increase decrease

98. Which of the following adjustments to convert net income to net cash provided by operating activities is not added to net income?
a. Gain on Sale of Equipment
b. Depreciation Expense
c. Patent Amortization Expense
d. Depletion Expense

99. Using the indirect method, if equipment is sold at a gain, the
a. sale proceeds received are deducted in the operating activities section.
b. sale proceeds received are added in the operating activities section.
c. amount of the gain is added in the operating activities section.
d. amount of the gain is deducted in the operating activities section.

100. A company had net income of $180,000. Depreciation expense is $26,000. During the year, Accounts Receivable and Inventory increased $15,000 and $40,000, respectively. Prepaid Expenses and Accounts Payable decreased $2,000 and $4,000, respectively. There was also a loss on the sale of equipment of $3,000. How much cash was provided by operating activities?
a. $146,000
b. $152,000
c. $226,000
d. $238,000
Submitted: 3 years ago.
Category: Homework
Expert:  SmartTutor replied 3 years ago.

SmartTutor :

51. b. a periodic inventory system.; 52. 53. b. periodic inventory system.; 54. a. automobile dealership.; 55.b. legal title; 56. b. expenses are understated.; 57. d. $900; 58.b. $588; 59. b. percentage of receivables basis.; 60. d. a customer's account becomes past-due.; 61. b. Accounts Receivable should be credited.; 62. c. requires a correcting entry for the period in which the account was written off.; 63. a. emphasizes the matching of expenses with revenues.; 64.c. debit to Bad Debts Expense for $7,900.; 65. b. indicates that actual bad debt write-offs have exceeded previous provisions for bad debts; 66. d. when an account is determined to be uncollectible.; 67. b. Uncollectible Accounts Expense; 68. . of a sound credit policy.; 69.b. The cost of the building will include the cost of replacing the roof.; 70. 71. a. cost.; 72. d. $25,050; 73.b. accrued over the life of the note.; 74. ; 75. c. crediting Sales Taxes Payable.; 76. c. reported as a current liability; 77. b. liability.; 78. c. Interest Expense 1,000 Interest Payable 1,000; 79. b. Notes Payable 50,000 Interest Payable 1,000 Cash 51,000; 80. c. $2,000.; 81. ; 82. c. Paid-in Capital in Excess of Par Value; 83. 84. 85. 86. 87. 88. 89. d. Organization Expense for $45,000.; 90. 91. 92. b. An increase in accounts receivable; 93. c. Depreciation expense; 94. d. An increase in Land; 95. b. addition to net income.; 96. c. Inventory decrease increase; 97. ; 98. 99.d. amount of the gain is deducted in the operating activities section.; 100.

SmartTutor :

(still working on bolded questions)

SmartTutor :

51. b. a periodic inventory system.; 52. d. Operating expenses – cost of goods sold = gross profit; 53. b. periodic inventory system.; 54. a. automobile dealership.; 55.b. legal title; 56. b. expenses are understated.; 57. d. $900; 58.b. $588; 59. b. percentage of receivables basis.; 60. d. a customer's account becomes past-due.; 61. b. Accounts Receivable should be credited.; 62. c. requires a correcting entry for the period in which the account was written off.; 63. a. emphasizes the matching of expenses with revenues.; 64.c. debit to Bad Debts Expense for $7,900.; 65. b. indicates that actual bad debt write-offs have exceeded previous provisions for bad debts; 66. d. when an account is determined to be uncollectible.; 67. b. Uncollectible Accounts Expense; 68. . of a sound credit policy.; 69.b. The cost of the building will include the cost of replacing the roof.; 70. a. $49,540; 71. a. cost.; 72. d. $25,050; 73.b. accrued over the life of the note.; 74.a. Notes Payable Interest Payable Cash; 75. c. crediting Sales Taxes Payable.; 76. c. reported as a current liability; 77. b. liability.; 78. c. Interest Expense 1,000 Interest Payable 1,000; 79. b. Notes Payable 50,000 Interest Payable 1,000 Cash 51,000; 80. c. $2,000.; 81. c. Paid-In Capital in Excess of Par Value will be credited for $130,000.; 82. c. Paid-in Capital in Excess of Par Value; 83.d. a nominal amount.; 84. c. Paid-In Capital in Excess of Par Value is debited if a credit balance exists in the account.; 85. b. is not permitted in most states; 86. b. is reported as part of paid-in capital on the balance sheet.; 87. d. treasury stock above cost.; 88. c. debit Land for $40,000.; 89. d. Organization Expense for $45,000.; 90. d. as an intangible asset.; 91. d. a decrease in inventory.; 92. b. An increase in accounts receivable; 93. c. Depreciation expense; 94. d. An increase in Land; 95. b. addition to net income.; 96. c. Inventory decrease increase; 97. b. Prepaid Expenses increase decrease; 98. b. Depreciation Expense; 99.d. amount of the gain is deducted in the operating activities section.;100. a. $146,000

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