Problem 1. At January 1, 2006, Orion Enterprises reported accounts receivable totaling $3,500. During the month, the company had credit sales of $5,000 and collected cash on accounts of $6,000. At the end of January, the balance in accounts receivable is
a. $3,500 credit
b. $9,500 debit
c. $5,500 credit
d. $2,500 debit
Problem 2. At June 1, 2006, Larry Levine Company reported Accounts Payable of $5,000. During the month, the company made purchases on account of $14,000 and payments on account of $10,000. At June 30, 2006, the balance in Accounts Payable is
a. $5,000 debit
b. $9,000 credit
c. $19,000 credit
d. $10,000 debit.
Problem 3. On January 1, Altillo borrowed $10,000 at 6% interest for 1 year. Altillo accrues interest on the note monthly. If no adjusting entry is made at the end of January, what will be the impact on the financial statements?
a. Revenues will be overstated by $50
b. Expenses will be understated by $600
c. Liabilities will be understated by $1,000
d. Net Income will be overstated by $50
Problem 4. 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
Problem 5. 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
Problem 6. Greer Company signed an $8,000 six-month note payable on October 1 that bears interest at a rate of 6%. The total interest to be accrued on this note at December 31 is
a. $40.
b. $120.
c. $240.
d. $480.
Problem 7. 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
Problem 8. The ending inventory of Larkin Company, which uses a periodic inventory system, was understated $7,000 on December 31, 2004, and overstated $4,000 on December 31, 2005. Because of these errors, 2005 net income was
a. overstated $4,000.
b. overstated $11,000.
c. understated $3,000.
d. understated $11,000.
Problem 9. Freight costs paid by a seller on merchandise sold to customers will cause an increase
a. in the selling expenses of the buyer.
b. in operating expenses for the seller.
c. to the cost of goods sold of the seller.
d. to a contra-revenue account of the seller.
Problem 10. Howe Company sells merchandise on account for $2,100 to Stine Company with credit terms of 2/10, n/30. Stine Company returns $600 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Howe Company make upon receipt of the check?
a. Cash 1,500
Accounts Receivable ..................................................... 1,500
b. Cash 1,470
Sales Returns and Allowances ................................................ 630
Accounts Receivable...................................................... 2,100
c. Cash 1,470
Sales Returns and Allowances ................................................ 600
Sales Discounts ...................................................................... 30
Accounts Receivable ..................................................... 2,100
d. Cash 2,058
Sales Discounts ...................................................................... 42
Sales Returns and Allowances ....................................... 600
Accounts Receivable ..................................................... 1,500
Problem 11. Which of the following would not be classified as a contra account?
a. Sales
b. Sales Returns and Allowances
c. Accumulated Depreciation
d. Sales Discounts