ACG2021 QUIZLET

• The market rate of interest is higher than the stated rate of interest on bonds issued by Dax, Inc. At what amount will the bonds be issued?

  A. At a premium

  B. More information is needed to determine the answer.

  C. At an amount lower than face value

  D. At an amount higher than face value

  c
• Which statement is true concerning the accrual basis of accounting?

  A. Revenues are recognized when earned and expenses are recognized when paid.

  B. Revenues are recognized when earned and expenses are recognized when incurred.

  C. Revenues are recognized when received from customers and expenses are recognized when incurred.

  D. Revenues are recognized when received from customers and expenses are recognized when paid.

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• Why are adjusting entires necessary?

  A. To update amounts in retained earnings for activity that occurred during the period.

  B. To correct errors due to erroneous recording of journal entries

  C. To update accounts due to resources used, amounts expired due to the passage of time, or amounts that may need to be recorded.

  D. To remove the balances of temporary accounts so that financial statements can be prepared.


  c
• In a period of rising prices, which inventory method will result in the largest amount of net income?

  A. LIFO

  B. FIFO

  C. Average Cost

  D. Specific Identification

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• On October 31, 2015, Williams Company issued $5,000, 8%, 6-month note to First National Bank. Williams accrued interest at December 31, 2015. How much will Williams credit to Cash to record the payment of the interest at maturity?

  A. $67

  B. $400

  C. $200

  D. $133

  c
• At what value are inventory items reported on the balance sheet?

  A. At the lower of selling price or replacement cost

  B. At the lower of selling price or original cost

  C. At the original cost to acquire

  D. At the lower of original cost or market value


  d
• Which internal is demonstrated by assigning different individuals to be responsible for related activities?

  A. Documentation Procedures

  B. Segregation of Duties

  C. Establishment of Responsibility

  D. Independent Internal Verification

  b
• At what point in time does a company recognize an expense when it uses the allowance method of accounting for uncollectible accounts?

  A. When a customer's account is identified as being uncollectible

  B. In the same period as the revenue is earned

  C. At the time expenses related to the collection activities are incurred

  D. At the time the account is written off


  b
• Respondo Company has a $145,000 balance in Accounts Receivable and a $420 debit balance in Allowance for Doubtful Accounts at year end just prior to recording adjusting entries. Credit sales for the period totaled $960,000. How much is the amount of the bad debt adjusting entry if an aging of accounts receivable estimates that 1.5% of its receivables will be uncollectible?

  A. $2,595

  B. $2,175

  C. $14,400

  D. $1,755


  a
• KB Retail sold merchandise for $800 subject to credit terms of 3/10 , n/30. What is part of the journal entry made by KB Retail to record the collection in full within the discount period in a perpetual inventory system?

  A. Debit to Sales Discounts for $24

  B. Debit to Cash for $824

  C. Credit to Accounts Receivable for $824

  D. Credit to Inventory for $24


  a
• Which statement is true concerning the preparation of closing entries?

  A. They can be prepared before or after adjusting entries.

  B. They cause the balances of all accounts at the end of the period to be adjusted to zero.

  C. They are necessary before financial statements can be prepared.

  D. They result in updating the balance in Retained Earnings for the period.


  d
• What does the balance in the Discount on Bonds Payable account represent?

  A. Additional interest cost associated with the issuance of debt.

  B. A reduction of interest cost associated with the issuance of debt.

  C. A reduction of the maturity value of the bonds.

  D. An increase of the maturity value of the bonds.

  a
• Which one of the following is an advantage of the corporate form of entity?

  A. Limited Life

  B. Government Regulation

  C. Ownership Rights are restricted to the same shareholders.

  D. Ability to acquire capital

  d
• At the beginning of June, assets totaled $45,600 and liabilities totaled $16,500. During the year, its assets increased by $7,000 and its stockholders' equity increased by $3,200. How much are total liabilities at the end of June?

  A. $20,300

  B. $29,100

  C. $5,3000

  D. None of the answer choices are correct.

  a
• Storage Products purchased 11,000 shares of its own $0.75 par value common stock at a cost of $8 per share on April 30, 2015. The stock was originally issued at $7 per share. Which of the following is part of the journal entry to record the purchase?

  A. Credit Common Stock for $88,000

  B. Debit Treasury Stock for $88,000

  C. Credit Common Stock for $8,250

  D. Debit Treasury Stock for $8,250

  b
• Which of the following best describes Accrued Liabilities?

  a. Long-term liabilities

  b. Current amounts owed to suppliers of inventory

  c. Expenses incurred but not paid at the end of the accounting period.

  d. Revenues that have been collected but not earned.

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• Assume PVH, the makers of Calvin Klein underwear, borrowed $100,000 from the bank to be repaid over the next five years, with principal payments beginning next month. Which of the following best describes the presentation of this debt in the balance sheet as of today?

  a. $100,000 in the long-term liability section.

  b. $100,000 plus the interest to be paid over the five-year period in the long-term liability section.

  c. A portion of the $100,000 in the current liability section and the remainder of the principal in the long-term liability section.

  d. A portion of the $100,000 plus interest in the current liability section and the remainder of the principal plus interest in the long-term liability section

  c
• Which of the following does not impact the calculation of the cash interest payments to be made to bondholders?

  a. Face value of the bond.

  b. Stated interest rate.

  c. Market interest rate.

  d. The length of time between payments.


  c
• Which of the following is false when a bond is issued at a premium?

  a. The bond will issue for an amount above its face value.

  b. Interest expense will exceed the cash interest payments.

  c. The market interest rate is lower than the stated interest rate.

  d. The issue price will be quoted at a number greater than 100.

  b
• To determine if a bond will be issued at a premium,

  discount or at face value, one must know which of the following pairs of

  information?

  a. The face value and the stated interest rate on the date the bonds were issued.

  b. The face value and the market interest rate on the date the bonds were issued.

  c. The stated interest rate and the market interest rate on the date the bonds were issued.

  d. You can't tell without having more information

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• A bond is issued at a price of 103 and retired early at a price of 97. Which of the following is true?

  a. A gain will be reported on the income statement when the bond is issued.

  b. A loss will be reported on the income statement when the bond is issued.

  c. A gain will be reported on the income statement when the bond is retired.

  d. A loss will be reported on the income statement when the bond is retired.

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• Which feature is not applicable to common stock ownership?

  a. Right to receive dividends before preferred stock shareholders.

  b. Right to vote on appointment of external auditor.

  c. Right to receive residual assets of the company should i cease operations.

  d. All of the above are applicable to common stock ownership.

  a
• Which statement regarding treasury stock is false?

  a. Treasury stock is considered to be issued but not outstanding.

  b. Treasury stock has no voting, dividend, or liquidation rights.

  c. Treasury stock reduces total stockholders' equity on the balance sheet.

  d. None of the above are false

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• Which of the following is ordered from the largest number of shares to the smallest number of shares?

  a. Shares authorized, shares issued, shares outstanding

  b. Shares issued, shares outstanding, shares authorized.

  c. Shares outstanding, shares issued, shares authorized.

  d. Shares in treasury, shares outstanding, shares issued.

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• Which of the following statements about the relative advantages of equity and debt financing is false?

  a. An advantage of equity financing is that is does not have to be repaid.

  b. An advantage of equity financing is that dividends are optional.

  c. An advantage of equity financing is that new stockholders get to vote and share in the earnings of the company.

  d. An advantage of debt financing is that interest is tax deductible.


  c
• A journal entry is not recorded on what date?

  a. Date of declaration.

  b. Date of record.

  c. Date of payment

  d. A journal entry is recorded on all of the above dates.

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• Revenue earned for fitness center fees, but not yet billed, totaled $2,700 on November 30.

  Dr. Accounts Receivable

  Cr. Deferred Revenue
• The note payable is a 9%, 1-year note issued October 1, 2015.

  dr. Interest Expense cr. Interest Payable
• An insurance policy was acquired on June 30, 2015; the premium paid for 1 year had a cost of $15,000.

  dr. Insurance Expense

  cr. Prepaid Insurance
• What is the journal entry to record Salaries and Wages Expense including payroll deductions?
• Dr. Payroll Tax Expense Cr. FICA Payable Cr. Unemployment Tax Payable


  What is the journal entry to record Payroll Tax Expense?
• Dr. Cash

  Cr. Notes Payable


  What is the journal entry to establish notes payable?
• Dr. Interest Expense

  Cr. Interest Payable


  What is the journal entry to record accrued interest?
• Dr. Interest Payable Dr. Interest Expense Cr. Cash


  What is the journal entry for interest payment?
• Dr. Notes Payable Cr. Cash

  What is the journal entry for note payment?
• What is the journal entry to record sales tax payable?

  Dr. Cash

  Cr. Sales Tax Payable

  Cr. Sales Revenue
• Dr. Cash

  Cr. Deferred Revenue

  Dr. Deferred Revenue

  Cr. Service Revenue

  What is the journal entry to record deferred revenue?
• face value


  the payment made when the bond matures; used to compute interest payments
• maturity date


  The date on which an investment becomes due for payment.
• stated interest rate


  the rate stated on the face of the bond, which is used to compute interest payments