Question 1. Able Company pays its employees twice a month, on the 7th and the 21st. On June 21, Able Company paid employee salaries of $4,000. This transaction would
a. Increase Stockholders’ Equity by $4,000.
b. Decrease the balance in Salaries Expense by $4,000.
c. Decrease net income for the month by $4,000.
d. Be recorded by a $4,000 debit to Salaries Payable and a $4,000 credit to Salaries Expense.
Question 2: On February 2, Reedy’s Printing Service received a payment of $3,000 for contracted printing work that will completed over the next 3 months. As of the end of February, the company had completed 1/3 of the work. The adjusting journal entry at the end of February for prepaid revenue will include
a. a debit to Unearned Revenue for $3,000
b. a credit to Unearned Revenue for $2,000
c. a credit to Printing Revenues for $1,000
d. a debit to Cash for $1,000
Question 3. Braxton Company purchased printing equipment at a cost of $12,000. The monthly depreciation on the equipment is $200. As of December 31, 2006, the balance in Accumulated Depreciation is $4,800. The book value of the equipment reported on the 12/31/2006 balance sheet will be
a. $12,000
b. $11,800
c. $7,200
d. $4,800
Question 4: West Company has the following account balances:
Purchases $30,000
Sales Returns and Allowances 4,000
Purchase Discounts 2,500
Freight-in 1,875
Delivery Expense 2,500
The cost of goods purchased for the period is
a. $32,500
b. $29,375
c. $31,875
d. $27,875
Question 5. On May 3, Horton Enterprises purchased goods for $1,225 on account from Elton Company, terms 2/10, n/30. On May 7, Horton returned goods valued at $225 to Elton. On May 12, Horton remitted the balance due. The amount of cash received by Elton on May 12 is
a. $1,225
b. $1,098
c. $1,000
d. $980
Question 6. On December 1, 2005, XYZ Co. sold merchandise which costs $400 on account to ABC Co. for $600 with terms of 3/10, n/30. XYZ Co. uses a perpetual inventory system. The journal entry to record this transaction on XYZ’s books will include:
a. a debit to Cost of Goods Sold for $600.
b. a debit to Sales Discounts for $18.
c. a credit to Sales Revenue for $200.
d. a credit to Merchandise Inventory for $400.
Question 7. Eaton Company sells merchandise on account for $1,000 to Tang Company with credit terms of 2/10, n/30. Tang Company returns $300 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Eaton Company make upon receipt of the check?
a. Cash 700
Accounts Receivable 700
b. Cash 686
Sales Returns and Allowances 314
Accounts Receivable 1,000
c. Cash 686
Sales Returns and Allowances 300
Sales Discounts 14
Accounts Receivable 1,000
d. Cash 980
Sales Discounts 20
Sales Returns and Allowances 300
Accounts Receivable 700
Question 8: Grant Company gathered the following reconciling information in preparing its July bank reconciliation:
Cash balance per books, 7/31 $3,500
Deposits in transit 150
Notes receivable and interest collected by bank 850
Bank charge for check printing 20
Outstanding checks 2,000
NSF check 170
The adjusted cash balance per books on July 31 is
a. $4,160.
b. $4,010.
c. $2,310.
d. $2,460.
Use the following information for questions 9-12
A company just starting business made the following four inventory purchases in June:
June 1 150 units $780
June 10 200 units 1,170
June 15 200 units 1,260
June 28 150 units 990
$4,200
A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand.
Question 9. Using the LIFO inventory method, the value of the ending inventory on June 30 (rounded to the nearest dollar) is
a. $1,073.
b. $1,305.
c. $2,895.
d. $3,128.
Question 10. Using the FIFO inventory method, the amount allocated to cost of goods sold for June is
a. $1,305.
b. $2,545.
c. $2,895.
d. $3,128.
Question 11. Using the average cost method, the amount allocated to the ending inventory on June 30 is
a. $4,200.
b. $3,000.
c. $1,150.
d. $1,200.
Question 12. The inventory method which results in the highest gross profit for June is
a. the FIFO method.
b. the LIFO method.
c. the weighted average unit cost method.
d. not determinable.
Question 13. If a purchaser using a perpetual system agrees to freight terms of FOB shipping point, then the
a. Merchandise Inventory account will be increased.
b. Merchandise Inventory account will not be affected.
c. seller will bear the freight cost.
d. carrier will bear the freight cost.