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100
Which of the following would be found in the investing activities (IA) section of the financial statements?
*Cash inflow from issuing stock *Cash inflow from interest revenue
*Cash outflow from purchasing land *Cash payment of dividends
*Purchase of equipment for long-term use in company operations
Cash outflow from purchasing land
Purchase of equipment for long-term use in company operations
100
A company experienced the following transactions. What is the company's net cash flow from operating activities (OA)?
1. Issued $7,000 of common stock to stockholders. 2. Provided $7,500 of services on account.
3. Paid $1,000 cash for operating expenses. 4. Collected $3,000 of cash from accounts receivable.
5. Paid a $300 cash dividend to stockholders.
NCF from OA = Inflow $2,000
No cash flow from services "on account" until paid. Cash collections $3,000 - $1,000 cash paid for expenses = $2,000 net cash flow.
100
Company B received a cash advance of $8,000 on November 1, Year 1, to provide services during the months of November, December, January, February. How will the year-end adjustment on December 31, Year 1, to recognize the partial expiration of the contract affect the Company B balance sheet?
Assets: N/A Liabilities: decrease $4,000 Equity: RE increase $4,000
Recognizing the revenue earned from November 1 through December 31 decreases Unearned Revenue (liability) by 2 months' amount of the contract, $4,000. The earned revenue is included in the income statement, increasing net income and flowing to retained earnings when the books are closed.
100
Which of the following accounting events could have caused these effects?
*Issued common stock. *Collected cash from accounts receivable. *Earned cash revenue. *Earned revenue on account.
Earned revenue on account
Increase accounts receivable (asset); increase revenue and net income; increase RE (equity) when books are closed.
100
On January 1, Year 2, J Company's accounts receivable and allowance for doubtful accounts balances were $65,337 and $7,200, respectively. During the year, J Company reported $81,000 of credit sales and wrote off $4,000 of receivables as uncollectible. Cash collections of receivables amounted to $25,000. J Company estimates that it will be unable to collect one percent (1%) of its credit sales.
How will the entry to recognize the write-off of the uncollectible accounts affect J Company's financial statements?
The write-off amount of $4,000 will decrease accounts receivable, and it will reduce allowance for doubtful accounts. As an asset exchange transaction, there will be a net effect of -0-. Also, there will be no cash flow.
200
If these elements and amounts were shown in a company's financial statements, what amount of expenses would be shown in the income statement?
Assets: $40,000 Liabilities: ? Common Stock: $8,000 Revenue: $10,000 Dividends: $1,000 Beginning Retained Earnings: $20,000 Ending Retained Earnings: $25,000
Expenses = $4,000
Beg RE + Rev - Exp - Div = End RE
20,000 + 10,000 - X - 1,000 = 25,000
200
If a company experienced the following transactions, what net amount would be reported in the operating activities section of the cash flow statement?
1) issued stock for $60,000 2) borrowed $30,000 from its bank 3) provided consulting services for $40,000 cash 4) paid back $3,000 of the bank loan 5) paid rent expense for $8,000 6) purchased equipment for $70,000 cash 7) paid $6,000 dividends to stockholders 8) paid employees' salaries of $10,000
NCF from OA = Inflow $22,000
40,000 - 8,000 - 10,000 = 22,000
200
Assume the perpetual inventory method is used.
1) A company purchased $12,000 of merchandise on account under terms 2/10, n/30.
2) The company returned $2,000 of merchandise to the supplier before payment was made.
3) The liability was paid within the discount period.
4) All of the merchandise purchased was sold for $20,000 cash.
What effect will the return of merchandise to the supplier have on the accounting equation?
Since the purchase was made on account and had not, yet, been paid, the purchase return will decrease assets (merchandise inventory) and decrease liabilities (accounts payable) by $2,000.
200
Company F earned $100,000 of revenue on account during Year 1. Company F also collected $30,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account.
What is the net realizable value of accounts receivable at the end of Year 1?
NRV = $67,000
NRV = AR - Allowance for doubtful accounts
AR = 100,000 - 30,000 = 70,000 Allow = 100,000 * .03 = 3,000
70,000 - 3,000 = 67,000
200
Beginning inventory @ February 1 = 40 units @ $ 5.00
First purchase @ February 7 = 100 units @ $ 4.20
Second purchase @ February 17 = 60 units @ $ 3.00
Sales @ February 28 = 100 units @ $ 6.30
What are the weighted average cost per unit and the gross margin using this method?
Weighted average cost per unit = $4.00 ; GM = $230.00
200 + 420 + 180 = $800
40 + 100 + 60 = 200 items
800/200 = $4.00 wtd avg cost each GM per unit = 6.30 - 4.00 = 2.30
300
If the following amounts were reported in the year-end financial statements of a company, what amount of net income would have been reported?
Cash: $4,000 Dividends: $2,000 Land: $30,000 Accounts Payable: $11,500 Accounts Receivable: $15,000 Common Stock $3,000 Revenue: $8,000 Expenses: $5,500
Net Income = $2,500
Rev - Exp = NI
8,000 - 5,500 = NI
300
The following events occurred during Year 1:
The business issued $23,000 of common stock to its stockholders. The business purchased land for $10,000 cash. Services were provided to customers for $100,000 cash. Services were provided to customers for $10,000 on account. The company borrowed $42,000 from the bank. Operating expenses of $40,000 were incurred and paid in cash. Salary expense of $20,000 was accrued. A dividend of $7,000 was paid to the stockholders.
Assuming the company began operations during Year 1, what would be the amount of retained earnings as of December 31, Year 1?
12/31/Y1 RE = $43,000
Beg RE = -0- because Y1 is the first year of operations
100,000 + 10,000 - 40,000 - 20,000 - 7,000 = 43,000
300
Company C uses the perpetual inventory method. The company purchased an item of inventory for $100 and sold the item to a customer for $105. What effect will the sale have on the company's inventory account?
Inventory will decrease by $100, the cost of the item sold.
300
On January 1, Year 2, the accounts receivable balance of Company G was $15,000 and the balance in the allowance for doubtful accounts was $5,000. On January 15, Year 2, an account balance of $760 was deemed uncollectible and was written-off. What was the net realizable value of accounts receivable immediately after the write-off?
NRV = $10,000
NRV = A/R - Allowance for doubtful accounts
15,000 - 5,000 = 10,000 before W/O
14,240 - 4,240 = 10,000 after W/O
300
Beginning inventory @ February 1 = 40 units @ $ 5.00
First purchase @ February 7 = 100 units @ $ 4.20
Second purchase @ February 17 = 60 units @ $ 3.00
Sales @ February 28 = 70 units @ $ 6.30
What is COGS using the LIFO cost flow method?
COGS = $222.00
$180 + 42 = $222
400
If the following amounts were reported in the year-end financial statements of a company, what amount of total assets would be shown in the balance sheet?
Cash: $4,000 Dividends: $2,000 Land: $30,000 Accounts Payable: $11,500 Accounts Receivable: $15,000 Common Stock $3,000 Revenue: $8,000 Expenses: $5,500
Total assets = $49,000
Cash, land, and accounts receivable are the only asset accounts shown in the given information.
4,000 + 30,000 + 15,000 = 49,000
400
Company A paid $12,000 for one year’s rent in advance beginning on July 1, Year 1. Company A’s Year 1 income statement would report rent expense, and its statement of cash flows would report cash outflow for rent, respectively, of ... ? , ?
$6,000 , $12,000
The word, "respectively," means that the terms in the answer will be shown in the same order as the terms in the question.
Rent expense for July - December = 1/2 of the amount paid.
Cash outflow for rent (OA) = the full amount paid.
400
Company D uses the perpetual inventory system. The company purchased $4,000 of merchandise under the terms 2/10, net/30. Company D paid for the merchandise within 10 days and also paid $50 freight to obtain the goods under terms FOB shipping point. All of the merchandise purchased was sold for $4,400 cash. What is the amount of gross margin on the sale?
Gross margin = $430
Rev - COGS = GM
COGS = Purchase price of goods - Purchase discount + Transportation-In
4,400 - (4,000 - 80 + 50) = GM
4,400 - 3,970 = 430
400
Company H ended Year 1 with balances in accounts receivable and allowance for doubtful accounts of $85,000 and $7,000, respectively. During Year 2, the company wrote off $5,000 of uncollectible accounts. After aging its receivables, Company H estimates that the ending allowance for doubtful accounts balance should be $6,000. What will Company H report as uncollectible accounts expense on its Year 2 income statement?
Uncollectible accounts expense (bad debt expense) = $4,000
Beg allowance - W/O = 7,000 - 5,000 = 2,000
Desired allowance balance = 6,000; 6,000 - 2,000 = 4,000 (additional amount needed)
400
Beginning inventory @ February 1 = 40 units @ $ 5.00
First purchase @ February 7 = 100 units @ $ 4.20
Second purchase @ February 17 = 60 units @ $ 3.00
Sales @ February 28 = 60 units @ $ 6.30
What is COGS using the FIFO cost flow method?
COGS = $284.00
200 + 84 = 284
500
A company experienced the following transactions:
1. Issued $2,000 of common stock to stockholders. 2. Provided $1,500 of services on account.
3. Paid $200 cash for operating expenses. 4. Collected $800 of cash from accounts receivable.
5. Paid a $250 cash dividend to stockholders.
Based on these transactions, only, what amount of net income would be reported?
Net income = $1,300
Rev - Exp = NI
1,500 - 200 = 1,300
500
Revenue on account amounted to $3,000. Cash collections of accounts receivable amounted to $600. Expenses for the period were $1,000. The company paid dividends of $200. What was the amount of net income?
Net income = $2,000
Rev - Exp = NI
3,000 - 1,000 = 2,000
500
Assume the perpetual inventory method is used.
1) Company E purchased merchandise that cost $10,000 under terms of 3/10, n/30 and FOB shipping point.
2) The company paid freight cost of $100 to have the merchandise delivered to its warehouse.
3) Payment was made to the supplier within 10 days.
4) All of the merchandise was sold to customers for $10,500 cash and delivered under terms FOB shipping point with freight cost amounting to $200.
What is the gross margin from these transactions?
GM = $700
GM = Rev - COGS COGS = Purchase price of merchandise - discount + freight-in
10,500 - (10,000 - 300 + 100) = 10,500 - 9,800 = 700
Freight-out is not part of Revenue or COGS, so it does not affect GM.
500
On January 1, Year 2, Ink Company had a $160,000 balance in accounts receivable and a $20,000 balance in allowance for doubtful accounts. During Year 2, Ink provided $169,000 of services on account. The company collected $50,000 cash from accounts receivable. Uncollectible accounts are estimated to be 1% of sales on account.
What is the amount of uncollectible accounts expense to be recognized on the Year 2 income statement?
Uncollectible accounts expense Y2 = $1,690
169,000 * .01 = 1,690
500
K Company purchased two identical inventory items. The item purchased first cost $10.00, and the item purchased second cost $11.00. One of the items was sold for $15.50. Which of the following statements is true?
*Cost of goods sold will be higher if K Company uses FIFO than if weighted average were used.
*Gross margin will be higher if Blake uses LIFO than it would be if FIFO were used.
*Ending inventory will be lower if Blake uses weighted average than if FIFO were used.
*The dollar amount assigned to ending inventory will be the same no matter which cost flow method is used.
Ending inventory will be lower if Blake uses weighted average than if FIFO were used.