multiple choice questions related to price raise


Multiple choice questions related to Price raise by supplier and the debit and credit.

1) Lund's Balloon Company has 2,500 balloons in inventory that cost $1.00 each. The company's supplier announced that effective immediately, all future balloons will cost $1.10 each. Lund's Balloon Company should:

a.increase the inventory account by $250 and increase the capital account by $250 
b.increase the inventory account by $250 and decrease the capital account by $250 
c.There is no effect from the price change on the accounts of Lund's Balloon Company. 
d.increase the inventory account by $250 and increase the accounts payable account by $250 
e.increase the inventory account by $250 and decrease the accounts payable account by $250

2) RJR Corporation began business on July 1, 20X2, by selling 1,000 shares of $10 par value capital stock at $30 per share. The effect of this transaction on RJR Corporation would be to:

a.decrease the capital stock at par by $30,000 and increase the cash account by $30,000 
b.decrease the capital stock at par by $10,000, decrease the paid-in capital in excess of par account by $20,000, and increase the cash account by $30,000 
c.increase the capital stock at par by $10,000, increase the paid-in capital in excess of par account by $20,000, and increase the cash account by $30,000 
d.increase paid-in capital in excess of par account by $30,000 and increase the cash account by $30,000 
e.increase the capital stock at par by $30,000 and increase the cash account by $30,000

3) Cline Company had total credit sales for the past year of $800,000. As of year-end, but before estimating bad debts, the company had a $70,000 debit balance in accounts receivable and a $600 debit balance in the Allowance for Uncollectible Accounts. Upon examination of the accounts receivable, it was found that 55% of the balance was 1-30 days old, 30% was 31-60 days old, 9% were 61-90 days old, and 6% were over 90 days old. Cline Company estimates the following bad debts percentages:

1-30 days

10%

31-60 days

25%

61-90 days

40%

Over 90 days

80%

The journal entry necessary to estimate bad debts using the aging method is:

a.Bad Debts Expense 14,380
Accounts Receivable 14,380 
b.Bad Debts Expense 14,980
Allowance for Uncollectible Accounts 14,980 
c.Bad Debts Expense 14,380
Allowance for Uncollectible Accounts 14,380 
d.Bad Debts Expense 16,180
Allowance for Uncollectible Accounts 16,180 
e.Bad Debts Expense 15,580
Allowance for Uncollectible Accounts 15,580

Brooks Company had the following activity in its inventory account during May 20X4.

 

 

 

Cost per

Total

Date

Activity

 

Units

Unit Cost

May 1

Beginning inventory

100

$3.00

$300

May 3

Purchase

40

3.10

124

May 7

Sale

50

 

 

May 12

Purchase

50

3.20

160

May 16

Sale

70

 

 

May 23

Sale

40

 

 

May 30

Purchase

60

3.30

198

 

Units in beginning inventory

100 units

Units purchased

150 units

Units sold

160 units

4) Refer the above table , what is the ending inventory balance at May 31, 20X4, for Brooks Company if the company uses perpetual FIFO as its inventory valuation method?

a.$358.00 
b.$198.00 
c.$294.00 
d.$297.50 
e.$270.00


5.Diamond Company acquired a $60,000 machine on January 1, 20X4. The machine is estimated to have a useful life of 4 years, and a residual value of $10,000. For unit depreciation purposes, the machine is expected to produce 500,000 units. what is the depreciable value of the machine acquired by Diamond Company?

a.$50,000 
b.$10,000 
c.$60,000 
d.$15,000 
e.cannot be determined without additional data

6)Features of preferred stock could include all of the following except:

a.callable 
b.convertible 
c.cumulative 
d.participating 
e.interest-bearing


7.Presented below are the balance sheets of Top Company and Bottom Company at January 1, 20X4:

Bottom Company
Balance Sheet
January 1, 20X4

Top Company
Balance Sheet
January 1, 20X4

 

 

Cash

$70

Cash

$240

Net Fixed Assets

210

Net Fixed Assets

210

Total Assets

$280

Total Assets

$450

 

 

 

 

Accounts Payable

$20

Accounts Payable

$70

Long-term Bonds Pay.

120

Long-term Bonds Pay.

150

Stockholders' Equity

140

Stockholders' Equity

230

Total Liab. & Equity

$280

Total Liab. & Equity

$450

On January 1, 20X4, Top Company acquired 100% of the outstanding common stock of Bottom Company for $140 in cash. Assume the book value of the accounts equals the market value , what elimination journal entry will be necessary in order to prepare a consolidated balance sheet immediately after the acquisition?

a.Stockholders' Equity - Bottom 140
Investment in Bottom Company 140 
b.Cash 140
Investment in Bottom Company 140 
c.Investment in Bottom Company 140
Stockholders' Equity - Bottom 140 
d.Stockholders' Equity - Bottom 140
Cash 140 
e.No journal entry is necessary.

8) The adjusting entry to recognize periodic depreciation has what effect on the basic accounting equation?

a.Decrease in assets, decrease in stockholders' equity 
b.Decrease in assets, increase in liabilities 
c.Decrease in assets, increase in stockholders' equity 
d.Decrease in assets, decrease in liabilities 
e.None of these

9.Farthing Company acquired a $40,000 machine on January 1, 20X4. The machine is estimated to have a useful life of 5 years, and a residual value of $4,000. For unit depreciation purposes, the machine is expected to produce 500,000 units.what is the balance in the accumulated depreciation account on December 31, 20X6, if Farthing Company uses double-declining-balance depreciation?

a.$28,224 
b.$31,360 
c.$40,000 
d.$34,496 
e.$37,140

10.Adams Company has 2,000,000 shares authorized and 250,000 shares issued and outstanding of its $4 par value common stock. The stock is currently selling for $60 per share.If Adams Company declared and issued a three-for-one stock split, what would be the effect on the following items after the stock split? Assume the old shares were exchanged for 750,000 new shares.

 

# of Shares Issued

Par Value

Market Price per Share  

A)

500,000

$2.00

$30.00

B)

1,000,000

$12.00

$20.00

C)

750,000

$4.00

$20.00

D)

1,000,000

$1.00

$15.00

E)

750,000

$1.33

$20.00

11.

Yeager Inc Balance Sheet
December 31, 20X4 and 20X3

 

12/31/X4

12/31/X3

Current Assets:

Cash

$6,900

$4,650

Accounts Receivable

14,250

11,850

Inventory

26,250

27,900

Supplies

1,800

3,150

Prepaid Insurance

2,100

1,500

Total Current Assets

51,300

49,050

Long-term Assets:

Fixed Assets

106,500

86,000

Accumulated Depreciation

(45,600)

(39,750)

Patent

9,000

10,500

Total Long-term Assets

69,900

56,750

Total Assets

$121,200

$105,800

Current Liabilities:

Accounts Payable

$9,150

$7,350

Wages Payable

3,300

3,900

Interest Payable

1,200

1,500

Taxes Payable

3,450

2,250

Total Current Liabilities

17,100

15,000

Long-term Liabilities:

 

 

Bonds Payable

30,450

35,000

Total Liabilities

47,550

50,000

Stockholders' Equity:

 

 

Common Stock

$34,050

$30,000

Retained Earnings

39,600

25,800

Total Stockholders' Equity

$73,650

$55,800

Total Liabilities and Stockholders' Equity

$121,200

$105,800

 

Yeager Inc
Income Statement
For the Year Ended December 31, 20X4

Sales

 

$223,250

Cost of Goods Sold

 

(94,700)

Gross Profit

 

128,550

Less Operating Expenses:

 

 

Wage Expense

$60,300

 

Supply Expense

5,400

 

Insurance Expense

4,500

 

Depreciation Expense

5,850

 

Amortization Expense

1,500

 

Rent Expense

8,100

85,650

Operating Income

 

42,900

Interest Expense

 

(3,900)

Income before Taxes

 

39,000

Income Tax Expense

 

(16,200)

Net Income

 

$22,800

 

what was the net cash flow from investing activities for Yeager Inc in 20X4?

a.$14,650 
b.$(14,650) 
c.$(20,500) 
d.$(19,000) 
e.Cannot be determined from the information given

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Financial Accounting: multiple choice questions related to price raise
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