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Omega Company pays its employees twice a month

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1. Omega Company pays its employees twice a month, on the 7th and the 21st. On June 21, Omega Company paid employee salaries of $4,000. This transaction would
be recorded by a $4,000 debit to Salaries Payable and a $4,000 credit to Salaries Expense.
increase owner's equity by $4,000.
decrease the balance in Salaries Expense by $4,000.
decrease net income for the month by $4,000.

2. On August 13, 2010, Merrill Enterprises purchased office equipment for $1,000 and office supplies of $200 on account. Which of the following journal entries is recorded correctly and in the standard format?
Office Equipment 1,000
Office Supplies 200
Accounts Payable 1,200

Accounts Payable 1,200
Office Equipment 1,000
Office Supplies 200

Office Equipment 1000
Account Payable 1,200
Office Supplies 200

Office Equipment 1,000
Office Supplies 200
Accounts Payable 1,200

3. Bee-In-The-Bonnet Company purchased office supplies costing $6,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $2,400 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be
Debit Office Supplies, $2,400; Credit Office Supplies Expense, $2,400.
Debit Office Supplies Expense, $3,600; Credit Office Supplies, $3,600.
Debit Office Supplies Expense, $2,400; Credit Office Supplies, $2,400.
Debit Office Supplies, $3,600; Credit Office Supplies Expense, $3,600.

4. The balance in the Prepaid Rent account before adjustment at the end of the year is $15,000, which represents three months' rent paid on December1. The adjusting entry required on December 31 is to
debit Prepaid Rent, $10,000; credit Rent Expense, $10,000.
debit Rent Expense, $5,000; credit Prepaid Rent, $5,000.
debit Prepaid Rent, $5,000; credit Rent Expense, $5,000.
debit Rent Expense, $10,000; credit Prepaid Rent $10,000.

5. The income statement and balance sheet columns of Reed Company's worksheet reflect the following totals:
Income Statement Balance Sheet
Dr. Cr. Dr. Cr.
Totals $58,000 $48,000 $34,000 $44,000

The net income (or loss) for the period is
$10,000 loss.
not determinable.
$48,000 income.
$10,000 income.


6. The income statement and balance sheet columns of Reed Company's worksheet reflect the following totals:
Income Statement Balance Sheet
Dr. Cr. Dr. Cr.
Totals $58,000 $48,000 $34,000 $44,000

To enter the net income (or loss) for the period into the above worksheet requires an entry to the
income statement debit column and the income statement credit column.
balance sheet debit column and the balance sheet credit column.
income statement credit column and the balance sheet debit column.
income statement debit column and the balance sheet credit column.

7. The income statement for the month of June, 2010 of Ramirez Enterprises contains the following information:
Revenues $7,000
Expenses:
Wages Expense $2,000
Rent Expense 1,000
Supplies Expense 300
Advertising Expense 200
Insurance Expense 100
Total expenses 3,600
Net income $3,400

The entry to close the revenue account includes a
credit to Income Summary for $7,000.
debit to Income Summary for $3,400.
credit to Income Summary for $3,400.
debit to Income Summary for $7,000.

8. The income statement for the month of June, 2010 of Ramirez Enterprises contains the following information:
Revenues $7,000
Expenses:
Wages Expense $2,000
Rent Expense 1,000
Supplies Expense 300
Advertising Expense 200
Insurance Expense 100
Total expenses 3,600
Net income $3,400

The entry to close the expense accounts includes a
credit to Rent Expense for $1,000.
credit to Income Summary for $3,600.
debit to Income Summary for $3,400.
debit to Wages Expense for $2,000.

9. The income statement for the month of June, 2010 of Ramirez Enterprises contains the following information:
Revenues $7,000
Expenses:
Wages Expense $2,000
Rent Expense 1,000
Supplies Expense 300
Advertising Expense 200
Insurance Expense 100
Total expenses 3,600
Net income $3,400

The entry to close Income Summary to Ramirez, Capital includes
a credit to Income Summary for $3,400.
credits to Expenses totalling $3,600.
a credit to Ramirez, Capital for $3,400.
a debit to Revenue for $7,000.


10. The income statement for the year 2010 of Poole Co. contains the following information:
Revenues $70,000
Expenses:
Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 6,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 73,500
Net income (loss) $(3,500)

The entry to close the revenue account includes a
credit to Income Summary for $3,500.
credit to Revenues for $70,000.
debit to Revenues for $70,000.
debit to Income Summary for $3,500.

11. The income statement for the year 2010 of Poole Co. contains the following information:
Revenues $70,000
Expenses:
Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 6,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 73,500
Net income (loss) $(3,500)

The entry to close the expense accounts includes a
credit to Income Summary for $3,500.
debit to Income Summary for $73,500.
debit to Wages Expense for $2,500.
debit to Income Summary for $3,500.

12. The income statement for the year 2010 of Poole Co. contains the following information:
Revenues $70,000
Expenses:
Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 6,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 73,500
Net income (loss) $(3,500)

The entry to close Income Summary to Poole, Capital includes
a credit to Poole, Capital for $3,500.
a debit to Revenue for $70,000.
credits to Expenses totalling $73,500.
a credit to Income Summary for $3,500.

13. Reese Company purchased merchandise with an invoice price of $2,000 and credit terms of 2/10, n/30. Assuming a 360 day year, what is the implied annual interest rate inherent in the credit terms?
72%
20%
24%
36%

14. Rasner Co. returned defective goods costing $3,000 to Markum Company on April 19, for credit. The goods were purchased March 10, on credit, terms 3/10, n/30. The entry by Rasner Co. on April 19, in receiving full credit is:
Accounts Payable 3,000
Merchandise Inventory 3,000

Accounts Payable 3,000
Merchandise Inventory 90
Cash 3,090

Accounts Payable 3,000
Purchase Discounts 90
Merchandise Inventory 2,910

Accounts Payable 3,000
Merchandise Inventory 90
Cash 2,910

15. Mather Company made a purchase of merchandise on credit from Underwood Company on August 8, for $9,000, terms 3/10, n/30. On August 17, Mather makes the appropriate payment to Underwood. The entry on August 17 for Mather Company is:
Accounts Payable 9,000
Purchase Returns and Allowances 270
Cash 8,730

Accounts Payable 8,730
Cash 8,730

Accounts Payable 9,000
Merchandise Inventory 270
Cash 8,730

Accounts Payable 9,000
Cash 9,000

16. On November 2, 2010, Griffey Company has cash sales of $4,200 from merchandise having a cost of $3,000. The entries to record the day's cash sales will include:
a $3,000 credit to Cost of Goods Sold.
a $3,000 credit to Merchandise Inventory.
a $4,200 credit to Cash.
a $4,200 debit to Accounts Receivable.

17. As a result of a thorough physical inventory, Hastings Company determined that it had inventory worth $270,000 at December 31, 2010. This count did not take into consideration the following facts: Carlin Consignment store currently has goods worth $52,000 on its sales floor that belong to Hastings but are being sold on consignment by Carlin. The selling price of these goods is $75,000. Hastings purchased $20,000 of goods that were shipped on December 27. FOB destination, that will be received by Hastings on January 3. Determine the correct amount of inventory that Hastings should report.
$322,000.
$345,000.
$342,000.
$290,000.

18. Kershaw Bookstore had 500 units on hand at January 1, costing $18 each. Purchases and sales during the month of January were as follows:
Date Purchases Sales
Jan. 14 375 @ $28
17 250 @ $20
25 250 @ $22
29 250 @ $32

Kershaw does not maintain perpetual inventory records. According to a physical count, 375 units were on hand at January 31.

The cost of the inventory at January 31, under the LIFO method is:
$8,000.
$7,750.
$1,000.
$6,750.

19. The cost of goods available for sale is allocated to the cost of goods sold and the
beginning inventory.
cost of goods purchased.
gross profit.
ending inventory.

20. Richmond's Wholesale uses a sales journal. An entry in this journal represents a
debit to Cash; credit to Sales.
debit to Accounts Payable; credit to Sales Returns and Allowances.
debit to Sales Discounts; credit to Cash.
debit to Accounts Receivable; credit to Sales.


21. The process of totaling the columns of a journal is termed
columnizing.
footing.
sizing.
ruling.

22. Which of the following would not be an appropriate heading for a column in the cash receipts journal?
Accounts Payable
Sales Discounts
Sales
Cash

23. If a company uses a multi-column purchases journal, which of the following possible headings for debit columns of the journal would not be appropriate?
Store Supplies
Office Supplies
Merchandise Inventory
Accounts Payable

24. Which of the following statements is incorrect?
A major consideration in developing an accounting system is cost effectiveness.
The accounting system should be able to accommodate a variety of users and changing information needs.
When an accounting system is designed, no consideration needs to be given to the needs and knowledge of the various users.
To be useful, information must be understandable, relevant, reliable, timely, and accurate.

25. In order to prevent a transaction from being recorded more than once, a company should maintain only one book of original entry.
True
False

26. A $100 petty cash fund has cash of $15 and receipts of $80. The journal entry to replenish the account would include a credit to
Cash for $85.
Cash for $80.
Petty Cash for $85.
Cash Over and Short for $5.

27. A $100 petty cash fund has cash of $18 and receipts of $86. The journal entry to replenish the account would include a
credit to Petty Cash for $86.
credit to Cash Over and Short for $4.
credit to Cash for $86.
debit to Cash for $86.

28. A customer charges a treadmill at Mike's Sport Shop. The price is $2,000 and the financing charge is 9% per annum if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a finance charge is added to the customer's account.

What is the amount of the finance charge?
$60
$180
$6
$15

29. Wright sells softball equipment. On November 14, they shipped $1,000 worth of softball uniforms to Paola Middle School, terms 2/10, n/30. On November 21, they received an order from Douglas High School for $600 worth of custom printed bats to be produced in December. On November 30, Paola Middle School returned $100 of defective merchandise. Wright has received no payments from either school as of month end. What amount will be recognized as net accounts receivable on the balance sheet as of November 30?
$900
$1,500
$1,000
$1,600

30. An aging of a company's accounts receivable indicates that $9,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,100 credit balance, the adjustment to record bad debts for the period will require a
debit to Allowance for Doubtful Accounts for $7,900.
debit to Bad Debts Expense for $9,000.
debit to Bad Debts Expense for $7,900.
credit to Allowance for Doubtful Accounts for $9,000.

31. During 2010, Hitchcock Inc. had sales on account of $132,000, cash sales of $54,000, and collections on account of $84,000. In addition, they collected $1,450 which had been written off as uncollectible in 2009. As a result of these transactions, the change in the accounts receivable balance indicates a
$102,000 increase.
$46,550 increase.
$100,550 increase.
$48,000 increase.

32. Black Company provides for bad debts expense at the rate of 2% of credit sales. The following data are available for 2010:
Allowance for doubtful accounts, 1/1/10 (Cr.) $10,500
Accounts written off as uncollectible during 2010 6,500
Credit sales in 2010 1,500,000
The Allowance for Doubtful Accounts balance at December 31, 2010, should be:
$25,000
$34,000
$30,000
$6,500

33. From a liquidity standpoint, it is more desirable for a company to have current
liabilities exceed current assets.
assets exceed current liabilities.
liabilities exceed long-term liabilities.
assets equal current liabilities.
34. Admire County Bank agrees to lend Givens Brick Company $200,000 on January 1. Givens Brick Company signs a $200,000, 8%, 9-month note. The entry made by Givens Brick Company on January 1 to record the proceeds and issuance of the note is
Cash 200,000
Notes Payable 200,000

Interest Expense 12,000
Cash 188,000
Notes Payable 200,000

Cash 200,000
Interest Expense 12,000
Notes Payable 212,000

Cash 200,000
Interest Expense 12,000
Notes Payable 200,000
Interest Payable 12,000

35. Admire County Bank agrees to lend Givens Brick Company $200,000 on January 1. Givens Brick Company signs a $200,000, 8%, 9-month note. What is the adjusting entry required if Givens Brick Company prepares financial statements on June 30?
Interest Payable 8,000
Cash 8,000

Interest Payable 8,000
Interest Expense 8,000

Interest Expense 8,000
Interest Payable 8,000

Interest Expense 8,000
Cash 8,000

36. On October 1, Steve's Carpet Service borrows $250,000 from First National Bank on a 3-month, $250,000, 8% note. What entry must Steve's Carpet Service make on December 31 before financial statements are prepared?
Interest Expense 20,000
Interest Payable 20,000

Interest Expense 5,000
Interest Payable 5,000

Interest Expense 5,000
Notes Payable 5,000

Interest Payable 5,000
Interest Expense 5,000

37. The interest charged on a $50,000 note payable, at the rate of 8%, on a 3-month note would be
$2,000.
$4,000.
$1,000.
$667.

38. A company receives $174, of which $14 is for sales tax. The journal entry to record the sale would include a
debit to Sales Tax Expense for $14.
debit to Sales Tax Payable for $14.
debit to Sales for $174.
debit to Cash for $174.



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