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:
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1-30 days
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10%
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31-60 days
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25%
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61-90 days
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40%
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Over 90 days
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80%
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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.
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|
|
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Cost per
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Total
|
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Date
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Activity
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Units
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Unit Cost
|
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May 1
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Beginning inventory
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100
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$3.00
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$300
|
|
May 3
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Purchase
|
40
|
3.10
|
124
|
|
May 7
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Sale
|
50
|
|
|
|
May 12
|
Purchase
|
50
|
3.20
|
160
|
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May 16
|
Sale
|
70
|
|
|
|
May 23
|
Sale
|
40
|
|
|
|
May 30
|
Purchase
|
60
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3.30
|
198
|
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Units in beginning inventory
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100 units
|
|
Units purchased
|
150 units
|
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Units sold
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160 units
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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:
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Bottom Company
Balance Sheet
January 1, 20X4
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Top Company
Balance Sheet
January 1, 20X4
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|
|
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Cash
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$70
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Cash
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$240
|
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Net Fixed Assets
|
210
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Net Fixed Assets
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210
|
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Total Assets
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$280
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Total Assets
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$450
|
|
|
|
|
|
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Accounts Payable
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$20
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Accounts Payable
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$70
|
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Long-term Bonds Pay.
|
120
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Long-term Bonds Pay.
|
150
|
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Stockholders' Equity
|
140
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Stockholders' Equity
|
230
|
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Total Liab. & Equity
|
$280
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Total Liab. & Equity
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$450
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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.
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# of Shares Issued
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Par Value
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Market Price per Share
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|
A)
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500,000
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$2.00
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$30.00
|
|
B)
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1,000,000
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$12.00
|
$20.00
|
|
C)
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750,000
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$4.00
|
$20.00
|
|
D)
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1,000,000
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$1.00
|
$15.00
|
|
E)
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750,000
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$1.33
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$20.00
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11.
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Yeager Inc Balance Sheet
December 31, 20X4 and 20X3
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|
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12/31/X4
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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