Chapters 1-2
Examples of correct responses:
What is a creditor? What is an external auditor? Who is an academic? What is a supplier?
The required adjusting entry (journal entry) for a recreation center that uses accrual accounting if the center purchases $800 of supplies to clean the swimming pool and $200 of supplies remain on hand at the end of the period
What is a $600 debit to Supplies Expense and a $600 credit to Supplies?
The amount of operating income if a company has $50,000 of Sales Revenue, $1,000 of Sales Discounts and $4,000 of Sales Returns & Allowances (SR&A), Cost of Goods Sold (CGS) of $20,000, operating expenses of $2,000, and interest expense of $1,000
$50,000 - $1,000 - $4,000 = $45,000 Net Sales
Gross Profit = $45,000 Net Sales- $20,000 CGS =
$25,000 Gross Profit
$25,000 Gross Profit - $2,000 Operating Expenses =
$23,000 Operating Income
Dawson Company's required journal entry on May 8 if Dawson uses a perpetual inventory system and purchases goods for $50,000 with terms 2/10,n/30 on May 1, returns $10,000 of goods on May 5, and pays for the goods on May 11
What is a $40,000 debit to Accounts Payable, an $800 credit to Inventory and a $39,200 credit to Cash?
Accounts Payable May 11: $50,000 - $10,000 = $40,000
Discount: .02 x $40,000 = $800
The capitalizable cost if a company buys outdoor lighting at a purchase price of $20,000, receives a $200 discount for prompt payment, pays $500 in installation costs and pays $50 to replace a broken wire after the lighting is used for 30 days
What is a capitalizable cost of $20,300?
$20,000 - $200 + $500 = $20,300
The $50 cost is a revenue expenditure.
The form of business operation that business owners should select to minimize the risk of personal liability if a business sells potentially hazardous materials
What is a corporation?
The dollar amount of retained earnings at the end of the period if beginning retained earnings is $1,000, unearned revenue is $200, sales revenue is $800, expenses total $900, and no dividends are paid during the period
What is $900?
Beg. RE $1,000 - Net Loss $100 - $0 Dividends = $900 Ending RE
This type of inventory system results in inventory records are continuously updated as goods are sold
What is a perpetual inventory system?
The internal control principles that are violated if a company has one cashier work the cash register and the same cashier also records cash receipts and deposits cash in the bank and the company does not bond the cashier (no insurance policy taken out on the individual handling cash)
What are violations of the segregation of duties and human resource principles of internal control?
The book value of a land improvement on December 31, 2024, if a company purchased the land improvement on January 1, 2024, for $25,000 and depreciates the land improvement at a rate of $500 per month.
What is $19,000?
Cost - Accumulated Depreciation = Book Value
$25,000 - (12 x $500) = $25,000 - $6,000 = $19,000
The total amount of assets if creditors’ claims on assets total $500 and owners’ claims on assets total $200
What is $700?
Assets? = Liabilities $500 + SE $200
SE = Stockholders' Equity
The effect on the balance sheet equation (Ex. assets, liabilities and stockholders' equity) if a company records a $10,000 investment by stockholders and purchases supplies for $2,000 cash
What is a $10,000 increase in assets and stockholders' equity?
Net increase in assets $10,000: Net increase in Cash $8,000 and increase in Supplies $2,000
Net increase in stockholders' equity: $10,000 increase in common stock
What is an approach that applies FISH (1st in still here) and assigns unit costs to the quantity of goods on hand at the end of the period starting with the earliest unit costs
The adjusted cash balance per books for Lola Company if the unadjusted cash balance per books is $28,000, deposits in total total $1,200, notes receivable and interest total $6,800, the bank charge for a safety deposit box is $160, outstanding checks total $16,000 and an NSF check of $1,360 is listed on the bank statement
What is an adjusted cash balance per books of $33,280?
$28,000 + $6,800 - $160 - $1,360 = $33,280
PD Construction Company's depreciation expense for 2024 if the company purchased equipment on January 1, 2024, for $90,000, paid $16,200 for installation, had an estimated salvage value of $18,000 and an estimated useful life of 5 years
What is depreciation expense of $17,640?
Depreciable Cost x Straight-line Rate = Depreciation Expense (prorate if owned less than 12 months)
Depreciable Cost = Cost - Salvage Value
Depreciable Cost = $88,200 =
[($90,000 + $16,200) - $18,0000]
Straight-line Rate = 1/useful life = 1/5 = 20%
$88,200 x .20 =
The type of business activity that results if a company pays dividends to stockholders
What is a financing activity?
This type of account increases with a debit (normal balance is a debit balance)
What are assets, expenses and dividends?
The dollar amount of ending inventory on Trident's balance sheet if Trident uses a periodic system and applies FIFO and a physical inventory shows that 8 units remain on hand at the end of April and corporate data shows that Trident had beginning inventory of 5 units at a cost of $20 each and Trident bought 6 units on April 15 for $25 each
What is $190 of ending inventory?
8 units ending inventory: FIFO- LISH (last in still here): 6 @ $25 = $150 and 2 @ $ 20 = $40
Total: $150 + $40 = $190
The items requiring an adjusting entry if a company has the following: outstanding checks, outstanding deposits, NSF check, bank charge for check printing, collection of notes receivable and interest
What is an adjusting entry for the NSF check, the bank charge for check printing and the collection of the notes receivable and interest?
A bakery's net income in 2024 using accrual accounting if the bakery's 2024 transactions include $5,400 of sales on account, the collection of $500 cash from customers for 2025 bakery orders, payment of $100 for supplies and payment of $300 for 2024 utilities
What is $5,100 of net income in 2024?
$5,400 Sales Revenue - $300 Utilities Expense = $5,100 Net Income
Prepaid Insurance is included in this asset category on a classified balance sheet
What is a current asset?
The resulting effect on the balance sheet equation (assets, liabilities and stockholders' equity) if a company using accrual accounting receives $500 cash for services that will be provided at a later date
What is a $500 increases in assets and liabilities?
The amount of ending inventory on the balance sheet if the records show the following and 10 units remain on hand at the end of the period and the company uses the average cost method
April 1 had 5 units @ $10 each; April 15 purchased 15 units $20 each
What is ending inventory of $175?
Weighted Avg. unit cost =
cost of goods available for sale/#units avail. for sale
Cost Goods Avail. for Sale = [(5 x $10)+(15 x $20)] = $350 cost of goods available for sale
$350/20 units available for sale =
$17.50 weighted avg. unit cost
10 units in ending inventory x weighted avg. unit cost $17.50 = $175 Ending Inventory
Highline Company's required adjusting entry to record bad debts if the company has Accounts Receivable of $10,000 at the end of the period, estimates that 10% of receivables will be uncollectible and the AFDA has a $100 debit balance prior to preparing the adjustment for bad debts
What is a $1,100 debit to Bad Debts Expense and a $1,100 credit to AFDA?
Accounts Receivable $10,000
AFDA $1,000
Accounts Receivable, net $9,000
Adjustment: By how much do we need to increase AFDA to go from -100 to a credit balance of $1,000 (current estimate for uncollectible accounts)?
-$100 + x = $1,000; X = $1,100
A grocery store's capitalizable cost for a display case used in the store if the records show:
Purchase price $5,000; Delivery and installation cost $200; Testing cost $50 (Display case is tested on ongoing basis after case installed) After using the case for 6 months, the store pays $300 to repair the case.
What is a capitalizable cost of $5,200?
$5,000 + $200 = $5,200