8. Photometer Company paid off $30,000 of its accounts payable in cash. What is
ID: 2601585 • Letter: 8
Question
8. Photometer Company paid off $30,000 of its accounts payable in cash. What is the journal entry that will be recorded?
A. Debit Accounts Payable $30,000, Credit Accounts Receivable $30,000
B. Debit Cash $30,000, Credit Accounts Receivable $30,000
C. Debit Accounts Payable $30,000, Credit Cash $30,000
D. Debit Accounts Receivable $30,000, Credit Cash $30,000
9. Apatha Company has assets of $600,000, liabilities of $250,000 and equity of $350,000. It buys office equipment on credit for $75,000. What is the effect on the accounting equation?
A. Assets increase by $75,000 and expenses increase by $75,000
B. Assets increase by $75,000 and expenses decrease by $75,000
C. Liabilities increase by $75,000 and expenses decrease by $75,000
D. Assets decrease by $75,000 and expenses decrease by $75,000
10. Viscount Company collected $42,000 cash on its accounts receivable. What is the journal entry that will be recorded?
A. Debit Cash $42,000; Credit Accounts Receivable $42,000
B. Debit Sales $42,000; Credit Cash $42,000
C. No journal entry is required
D. Debit Accounts Receivable $42,000; Credit Sales $42,000
11. A company had sales of $695,000 and its cost of goods sold of $278,000. Its gross margin equals:
A. $(417,000)
B. $695,000
C. $278,000
D. $417,000
12. Merchandise inventory:
A. Is an expense
B. Is a current asset purchased for resale
C. Includes office supplies
D. Is classified with investments on the balance sheet
13. Closing Entries would be prepared before
A. Financial Statements are prepared
B. A post-closing Trial Balance
C. An Adjusted Trial Balance
D. Adjusting Entries
14. The Closing Entry for an Expense account would
A. Debit Income Summary and Credit the expense
B. Debit the expense and Credit Income Summary
C. Credit Retained Earnings and Debit the expense
D. Credit Revenue and debit the expense
15. The Retained Earnings Statement is based on which of the following relationships?
A. Retained Earnings – Net Income – Dividends
B. Retained Earnings – Net Income + Dividends
C. Retained Earnings + Net Income + Dividends
D. Retained Earnings + Net Income – Dividends
16. If current assets are $90,000 and current liabilities are $30,000, working capital will be:
A. 33.3%
B. 3:1
C. $60,000
D. $120,000
17. Dividends will have what effect on Retained Earnings?
A. Increase
B. Decrease
C. No effect
D. Depends if there is a Net Income or Loss
18. Which accounts should be closed?
A. Expenses and Revenues
B. Dividends
C. Income Summary
D. All of the above
19. What type of inventory system ensures the most up to date balances at all times?
A. Perpetual Inventory System
B. Periodic Inventory System
C. No Inventory System
D. Mofrey Inventory System
Explanation / Answer
8 Debit Accounts Payable $30,000, Credit Cash $30,000 9 Assets increase by $75,000 and Liabilities increase by $75,000 10 Debit Cash $42,000; Credit Accounts Receivable $42,000 11 Gross margin = 695000-278000= 417000 12 Merchandise inventory Is a current asset purchased for resale 13 Closing Entries would be prepared before A post-closing Trial Balance 14 The Closing Entry for an Expense account would Debit Income Summary and Credit the expense 15 Retained Earnings + Net Income + Dividends 16 Working capital = 90000-30000 = 60000 17 Decrease 18 All of the above accounts should be closed 19 Perpetual Inventory System
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