EXAM 4 ACC225

• The matching principle is

  As applied to bad debts, requires: The use of the allowance method of accounting for bad debts
• The allowance method based on the idea that a given percent of a company's credit sales for the period is uncollectible is

  The percent of sales method.
• On November 1, Dries Company accepted a $10,000, 90-day, 8% note from a customer on account. What entry should be made on the November 1 to record the acceptance of the note?

  Debit Note Receivable $10,000; credit Accounts Receivable $10,000.
• he following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense.

  
  

  Accounts receivable $435,000 Debit

  Allowance for Doubtful Accounts

  1,250 Debit

  Net Sales 2,100,000 Credit

  All sales are made on credit. Based on past experience, the company estimates 1% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

  Debit Bad Debts Expense 21,000; Credit Allowance for Doubtful Accounts 21,000
• Mullis Company sold merchandise on account to a customer for $625, terms n/30. The journal entry to record this sale transaction would be:


  Debit Accounts Receivable $625 and credit Sales $625.
• Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper's entry to record the transaction should be

  Debit Notes Receivable for $25,000;

  credit Cash $25,000.
• Mullis Company sold merchandise on account to a customer for $625, terms n/30. The journal entry to record the collection on account would be:

  Debit Cash of $625

  and credit Accounts Receivable $625.
• Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and signed a 90-day, 6% promissory note for the $4,000. Food Supplier's journal entry to record the collection on the maturity date is:

  Debit Cash 4,060; Credit Interest Revenue 60; Credit Notes Receivable 4,000
• The interest accrued on $7,500 at 6% for 90 days is:

  112.50
• Valle Company purchased $7,800 in plumbing components from Tibby Company. Valle Company signed a 60-day, 10% promissory note for $7,800. If the note is dishonored, what is the amount due on the note?

  7,930
• Which of the following would be subtracted from the balance per company's books?

  service charges
• Clayborn Company' bank reconciliation as of May 31 is shown below.

  
  

  Bank balance $15,800 Book balance $17,025

  + Deposit in transit 5,200 Bank service fees-25

  - Outstanding checks -4,600 NSF returned -600

  Adjusted book balance $16,400 $16,400

  
  

  The adjusting journal entries that Clayborn must record as a result of the bank reconciliation include:

  A credit to Cash of $600
• The amount of deposits in transit is included on the bank reconciliation as a(n)

  deduction from the balance per bank statement
• Journal entries based on the bank reconciliation are necessary in the company's accounts for

  book errors
• outstanding checks refer to checks that have been:

  checks that have been: Written, recorded on the company books, sent to the payee, but not yet paid by the bank.
• On a bank reconciliation, the amount of an unrecorded bank service charge should be:


  Deducted from the book balance of cash.
• During the month of July, Clanton Industries issued a check in the amount of $845 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should:

  Deduct the check amount from the bank balance.
• Great Falls Co.'s bank reconciliation as of February 28 is shown below.

  
  

  Bank balance $37,643 Book balance $38,153

  +Deposit in transit 2,950 Note collection+745

  -Outstanding checks -1,730 Check printing -35

  Adjusted book balance$38,863 $38,863

  
  

  The adjusting journal entries that Great Falls must record as a result of the bank reconciliation include:

  Debit Cash $745; credit Note Receivable $745.
• If a company made a bank deposit on September 30 that did not appear on the bank statement dated September 30, in preparing the September 30 bank reconciliation, the company should:

  Add the deposit to the bank statement balance.
• An analysis that accounts for any differences between the checking account balance according to the company's records and the balance reported by the bank on the bank statement is a(n):

  Bank reconciliation.
• The cash account in the company's general ledger is a(n)

  asset with a normal debit balance
• What journal entry is necessary in the company's general ledger to record outstanding checks?

  no journal entry
• ABC Company made a bank deposit on April 30 that did not appear on the bank statement dated April 30, in preparing the April bank reconciliation, the company should:

  Add the deposit to the bank statement balance.
• On August 9, Massey Company receives a $8,500, 90-day, 8% note from customer Pay Sums as payment on account. What entry should be made on the date of maturity assuming the maker pays in full?

  Debit Cash $8,670; credit Interest Revenue $170; credit Notes Receivable $8,500.
• On July 9, Puffin Co. receives a $8,500, 90-day, 8% note from customer Dayton Somms as payment on account. Compute the amount due at maturity for the note.


  8670
• Shasta borrowed $20,000 by signing a 180-day promissory note at 9%. The total interest due on the maturity date is:

  900
• Star Corporation borrowed $10,000 by signing a 90-day promissory note at 9%. The maturity value of the note is:

  10,225
• The maturity date


  of a note receivable: Is the day the note is due to be repaid.
• David makes a $25,000, 90-day, 7% cash loan to Clay Co. David's entry to record the collection of the note and interest at maturity should be:

  Debit Cash $25,437.50; credit Interest Revenue $437.50; credit Notes Receivable $25,000.
• Martinez owns machinery that cost $87,000 with accumulated depreciation of $40,000. The company sells the machinery for cash of $42,000. The journal entry to record the sale would include

  A debit to Cash of $42,000.
• Martinez owns an asset that cost $87,000 with accumulated depreciation of $40,000. The company sells the equipment for cash of $42,000. At the time of sale, the company should record:

  A loss on sale of $5,000.
• The journal entry to record depreciation is

  debit depreciation expense, credit accumulated depreciation
• The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

  Straight-line depreciation.
• A company discarded a computer system originally purchased for $18,000. The accumulated depreciation was $17,200. The company should recognize a(an):

  800 loss
• Victory Company purchases office equipment at the beginning of the year at a cost of $15,000. The machine's useful life is estimated to be 7 years with a $1,000 salvage value. The journal entry to record the first year depreciation is:

  Debut Depreciation Expense 2,000; Credit Accumulated Depreciation 2,000
• The formula to compute annual straight-line depreciation is:

  (Cost minus salvage value) divided by the useful life in years.
• The total cost of an asset less its accumulated depreciation is called:

  book value
• A company sold equipment that originally cost $100,000 for $60,000 cash. The accumulated depreciation on the equipment was $40,000. The company should recognize a:


  $0 gain or loss.
• One characteristic of plant assets is that they are:

  Used in operation
• Depletion is:


  The process of allocating the cost of natural resources to the period when it is consumed.