I\'m not looking for just answers (ie. A, B, C). I want to understand the materi
ID: 2445189 • Letter: I
Question
I'm not looking for just answers (ie. A, B, C). I want to understand the material. Those answers with the most clear explanations I will rate EXCELLENT !!!!!!!!!!!!!!! Thank you!
Accounting Questions:
(1). Which of the following is included in the sale of inventory on account?
Debit to Cost of Goods Sold
Credit to Sales Revenue
Debit to Inventory
Two of the above are included
All of the above are included
(2). Bradford & Co. receives $3,000 cash for services to be performed next month. The collection of cash would be recorded with a:
Debit to Cash; Credit to Accounts Payable
Debit to Service Revenue; Credit to Unearned Revenue
No entry since no services have been performed
Debit to Cash; Credit to Unearned Revenue
Debit to Cash; Credit to Service Revenue
(3). Tim creates the following accounts receivable aging report at the end of the year. Prior to adjusting entries, the Allowance for Uncollectible Accounts has a credit balance of $500. The year-end adjustment would include a:
Age
Amount
Estimated uncollectible
Less than 30 days
$6,000
5%
31-60 days
$4,000
10%
61+ days
$2,000
25%
Debit to Bad Debt Expense for $1,700
Debit to Bad Debt Expense for $1,200
Credit to Allowance for Uncollectible Accounts for $1,400
Credit to Accounts Receivable for $500
Debit to Bad Debt Expense for $700
(4). Based on the information below, what amount of impairment loss would be reported?
Asset
Fair value
Estimated cash flows
Book value
Building
$135,000
$138,000
$140,000
Equipment
$25,000
$36,000
$30,000
Truck
$34,000
$45,000
$42,000
$18,000
$37,000
$13,000
$5,000
$23,000
(5). Which of the following causes an increase in stockholders" equity?
Receive cash from customers for services previously provided
Pay dividends to stockholders
Receive cash from bank borrowing
Sell a long-term asset for more than its book value
Receive cash in advance from customers
(6). Using the allowance method, what impact does writing off an actual bad debt have on the accounting equation?
Decrease assets
Decrease stockholders" equity
Decrease revenues
Two of the above are correct
No effect
(7). Suppose a company spends $100,000 on research and development in 2012. As a result of the products developed, additional revenue is earned over the next five years totalling $600,000. When is the cost of the research and development in 2012 recognized as an expense?
Evenly over the period 2012-2017
Full amount in 2013
Evenly over the period 2013-2017
Full amount in 2017
Full amount in 2012
(8). What is the effect on the accounting equation when inventory is purchased on account?
No change
Increase equities
Decrease in assets
Decrease in liabilities
Increase in liabilities
(9). Which of the following would be recorded as an adjusting entry at the end of the year?
Impairment of long-term assets
Lower-of-cost-or-market inventory valuation
Contingent liabilities
Allowance for uncollectible accounts
All of the above are included in adjusting entries at the end of the year
(10). Which of the following transactions would cause an increase in both the assets and liabilities of a company?
Purchase of a factory by issuing a note payable
Prepaying for next year"s rent
Services received on account
Collection of accounts receivable that was written off last year
Pay for inventory purchased 90 days ago
(11). Rent Expense of $42,000 is paid with cash during one month, and Inventory of $85,000 was purchased on account during the same month. Did stockholders" equity increase or decrease and by how much?
$127,000 increase
$43,000 increase
$85,000 increase
$42,000 decrease
No change
(12). Leinart Co. had the following inventory transactions for the period. Calculate the cost of goods sold using the average costs method (Do not round until final answer).
Date
Quantity
Purchase
Cost
Selling
Price
July 1
Beginning Inventory
350
$1
July 10
Sale
150
$5
July 14
Purchase
400
2
July 17
Sale
300
6
July 28
Purchase
200
4
$1,123.69
$845.13
$1,026.32
$923.68
$1,050.00
(13). Tim creates the following accounts receivable aging report at the end of the year. Prior to adjusting entries, the Allowance for Uncollectible Accounts has a debit balance of $500. The year-end adjustment would include a:
Age
Amount
Estimated uncollectible
Less than 30 days
$6,000
5%
31-60 days
$4,000
10%
61+ days
$2,000
25%
Debit to Bad Debt Expense for $1,200
Credit to Accounts Receivable for $500
Credit to Allowance for Uncollectible Accounts for $1,400
Debit to Bad Debt Expense for $1,700
Debit to Bad Debt Expense for $700
(14). Suppose a company uses the direct write-off method instead of the allowance method in accounting for uncollectible accounts. What is the impact on the accounting equation of an actual bad debt?
No effect
Decrease liabilities
Increase liabilities
Decrease assets
Decrease revenues
(15). The collection of sales tax by a company when selling goods to customers would be recorded as a (an):
Liability
Expense
Dividend
Contra asset
Sales taxes collected are not recognized by the company
(16). On June 8, Dayne Corp. purchased inventory on account for $15,000 with terms of 3/15. On June 10, Dayne Corp. returned $1,000 worth of inventory, and then paid the remaining balance on June 20. How would Dayne record the payment on June 20?
Debit Accounts Payable $15,000; Credit Inventory $450; Credit Cash $14,550
Debit Accounts Payable $13,580; Debit Inventory $420; Credit Cash $14,000
Debit Accounts Payable $14,550; Debit Inventory $450; Credit Cash $15,000
Debit Accounts Payable $14,000; Credit Inventory $420; Credit Cash $13,580
Debit Accounts Payable $14,000; Credit Cash $14,000
(17). In 2012, Tony estimates that warranty costs in the following year will be $25,000. Actual warranty costs in 2013 are only $20,000. What is the effect on the accounting equation when recording actual warranty costs in 2013?
Assets increase
Liabilities decrease
Stockholders" equity increases
Stockholders" equity decreases
Liabilities increase
A.Debit to Cost of Goods Sold
B.Credit to Sales Revenue
C.Debit to Inventory
D.Two of the above are included
E.All of the above are included
Explanation / Answer
1 Sale of Invetory on account. Debit to cost of goods sold yes, when sale is happened, the corresponding inventroy value has to be debited to the cost of goods sold Credit to sales revenue yes, the sales account is credited as per the accounting principle credit all incomes Debit to Inventory No inventory is debited at the time of purchase Two of the above are included Yes the first two options All the above are included No since inventory will not be debited Answer is D 2 Receives cash in advance for service to be performed Debit to cash; credit to Accounts payable No, since it is not account payable as the amount is not payable once service is performed Debit to service Revenue; credit to unearned revenue No, since the service revenue is not debited. It is to be credited once service is performed No entry since no services have been performed No, though service is not performed entry to be made for cash received in advance for services to be performed Debit to cash; credit to unearned revenue Yes, the unearned revenue will be reversed once the service is performed by crediting Service Revenue account Debit to Cash; cerdit to service revenue No, until service is performed service Revenue should not be recognised 3 Amount of Uncollectible Age Amount Estimated Uncollectibe % Amount Less than 30 days $ 6,000 5% $ 300 31-60 days $ 4,000 10% $ 400 61 + days $ 2,000 25% $ 500 Total allowance for uncollectibe accounts $ 1,200 Less Opening Balance $ 500 Debit to Bad debts expense (1200-500) $ 700 Journal Entry for bad debts allowance method Debit Credit Bad debts Expense $ 700 Allowance for Uncollectible Accounts $ 700 The bad debts expense account, just like any other expense account, is closed to income summary account of the period. The allowance for doubtful debts is contra-asset account. It is presented on balance sheet by subtracting it from accounts receivable as shown below: Accounts receivable $ 12,000 Less: Allwance for uncollectible accounts (500+700) $ -1,200 Accounts receivable, net $ 10,800 4 Besides Charging annual depreciation by the reason of wear and tear etc; to re-instate the correct value of the asset , impairment loss needs to be provide. The difference between Carrying amount (Book value) and recoverable amount (lower of fair value or value in use/ Estmated cash flows) is termed as impairment loss. Asset Boo Value Lower of Fair value or Estimated cash flows Impairment loss Building $ 1,40,000 $ 1,35,000 $ 5,000 Equipment 30000 25000 $ 5,000 Truck 42000 34000 $ 8,000 Total impairment loss (Answer A) $ 18,000
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