Intermediate Accounting practice ch2

The accounting equation can be stated as: A + L - OE = 0. A - L + OE = 0. -A + L - OE = 0. A - L - OE = 0.

Examples of external transactions include all of the following except: Paying employee salaries. Purchasing equipment. Depreciating equipment. Collecting a receivable.

Examples of internal transactions include all of the following except: Writing off an uncollectible account. Recording the expiration of prepaid insurance. Recording unpaid salaries. Paying salaries to company employees.

Incurring an expense for advertising on account would be recorded by: Debiting liabilities. Crediting assets. Debiting an expense. Debiting assets.

A sale on account would be recorded by: Debiting revenue. Crediting assets. Crediting liabilities. Debiting assets.

Mary Parker Co. invested $15,000 in ABC Corporation and received capital stock in exchange. Mary Parker Co.'s journal entry to record this transaction would include a: Debit to investments. Credit to retained earnings. Credit to capital stock. Debit to expense

Hughes Aircraft sold a four-passenger airplane for $380,000, receiving a $50,000 down payment and a 12% note for the balance. The journal entry to record this sale would include a: Credit to cash. Debit to cash discount. Debit to note receivable. Credit to note receivable.

Somerset Leasing received $12,000 for 24 months' rent in advance. How should Somerset record this transaction? Prepaid rent 12,000 Rent expense 12,000 Cash 12,000 Deferred revenue 12,000 Interest expense 12,000 Interest payable 12,000 Salaries expense 12,000 Salaries payable 12,000

Which of the following accounts has a normal debit balance? Accounts payable. Accrued taxes. Accumulated depreciation. Advertising expense.

Recording revenue that is earned, but not yet collected, is an example of: A prepaid expense transaction. A deferred revenue transaction. An accrued liability transaction. An accrued receivable transaction.

When a magazine company collects cash for selling a subscription, it is an example of: An accrued liability transaction. An accrued receivable transaction. A prepaid expense transaction. A deferred revenue transaction.

On December 31, 2015, Coolwear, Inc. had a balance in its prepaid insurance account of $48,400. During 2016, $86,000 was paid for insurance. At the end of 2016, after adjusting entries were recorded, the balance in the prepaid insurance account was 42,000. Insurance expense for 2016 would be: $6,400. $134,400. $86,000. $92,400.

Adjusting entries are primarily needed for: Cash basis accounting. Accrual accounting. Current value accounting. Manual accounting systems.

Prepayments occur when: Cash flow precedes expense recognition. Sales are delayed pending credit approval. Customers are unable to pay the full amount due when goods are delivered. Manufactured goods await quality control inspections.

Accruals occur when cash flows: Occur before expense recognition. Occur after revenue or expense recognition. Are uncertain. May be substituted for goods or services.

On December 31, 2016, the end of Larry's Used Cars' first year of operations, the accounts receivable was $53,600. The company estimates that $1,200 of the year-end receivables will not be collected. Accounts receivable in the 2016 balance sheet will be valued at: $53,600. $54,800. $52,400. $1,200.

Which of the following is not an adjusting entry? Prepaid rent Rent expense Cash Deferred revenue Interest expense Interest payable Salaries expense Salaries payable

When a business makes an end-of-period adjusting entry with a debit to supplies expense, the usual credit entry is made to: Accounts payable. Supplies. Cash. Retained earnings.

Carolina Mills purchased $270,000 in supplies this year. The supplies account increased by $10,000 during the year to an ending balance of $66,000. What was supplies expense for Carolina Mills during the year? $300,000. $280,000. $260,000. $240,000.

Yummy Foods purchased a two-year fire and extended coverage insurance policy on August 1, 2016, and charged the $4,200 premium to Insurance expense. At its December 31, 2016, year-end, Yummy Foods would record which of the following adjusting entries? Insurance expense 875 Prepaid insurance 875 Prepaid insurance 875 Insurance expense 875 Insurance expense 875 Prepaid insurance 3,325 Insurance payable 4,200 Prepaid insurance 3,325 Insurance expense 3,325

On September 1, 2016, Fortune Magazine sold 600 one-year subscriptions for $81 each. The total amount received was credited to deferred subscriptions revenue. What is the required adjusting entry at December 31, 2016? Deferred subscriptions revenue 48,600 Subscriptions revenue 16,200 Prepaid subscriptions 32,400 Deferred subscriptions revenue 16,200 Subscriptions revenue 16,200 Deferred subscriptions revenue 16,200 Subscriptions payable 16,200 Deferred subscriptions revenue 32,400 Subscriptions revenue 32,400

On September 15, 2016, Oliver's Mortuary received a $6,000, nine-month note bearing interest at an annual rate of 10% from the estate of Jay Hendrix for services rendered. Oliver's has a December 31 year-end. What adjusting entry will the company record on December 31, 2016? Interest receivable 175 Interest revenue 175 Interest receivable 230 Interest revenue 230 Interest receivable 175 Notes receivable 175 Interest receivable 600 Interest revenue 175 Cash 425

On November 1, 2016, Tim's Toys borrows $30,000,000 at 9% to finance the holiday sales season. The note is for a six-month term and both principal and interest are payable at maturity. What is the balance of interest payable for the loan as of December 31, 2016? $112,500. $225,000. $450,000. $1,350,000.

In its first year of operations Best Corp. had income before tax of $500,000. Best made income tax payments totaling $210,000 during the year and has an income tax rate of 40%. What was Best's net income for the year? $290,000. $294,000. $300,000. $306,000.

Permanent accounts would not include: Cost of goods sold. Inventory. Current liabilities. Accumulated depreciation.

Temporary accounts would not include: Salaries payable. Depreciation expense. Supplies expense. Cost of goods sold.

When converting an income statement from a cash basis to an accrual basis, which of the following is incorrect? An adjustment for depreciation reduces net income. A decrease in salaries payable decreases net income. A reduction in prepaid expenses decreases net income. An increase in accrued payables decreases net income.

Compared to the accrual basis of accounting, the cash basis of accounting produces a higher amount of income by the net decrease during the accounting period of: Accounts Receivable Accrued Liabilities a. Yes No b. No Yes c. Yes Yes d. No No Option a Option b Option c Option d