Question 1

The accounting equation can be stated as:

Accepted Answer

A)  A + L − OE = 0. 
B)  A − L + OE = 0. 
C)  −A + L − OE = 0. 
D)  A − L − OE = 0.

Question 2

-Prepare a classified balance sheet for China Tea Company as of December 31, 2018.

Accepted Answer

The answer of 
-Prepare a classified balance sheet for China...

Question 3

Prepayments occur when:

Accepted Answer

A)  Cash flow precedes expense recognition. 
B)  Sales are delayed pending credit approval. 
C)  Customers are unable to pay the full amount due when goods are delivered. 
D)  Manufactured goods await quality control inspections.

Question 4

\[\begin{array} { | l | l | l | l | } 
\hline 1100 & \text { Cash } & 2170 & \text { Property taxes payable } \
\hline 1120 & \text { Short-term investments } & 2180 & \text { Rent payable } \
\hline 1130 & \text { Notes receivable } & 2200 & \text { Long-term notes payable } \
\hline 1140 & \text { Accounts receivable } & 3100 & \text { Common stock } \
\hline 1145 & \text { Loan receivable } & 3200 & \text { Retained earnings } \
\hline 1150 & \text { Interest receivable } & 5000 & \text { Sales revenue } \
\hline 1160 & \text { Other accrued receivables } & 5300 & \text { Interest revenue } \
\hline 1200 & \text { Inventory } & 6000 & \text { Cost of goods sold } \
\hline 1250 & \text { Supplies } & 6200 & \text { Advertising expense } \
\hline 1260 & \text { Prepaid expenses } & 6210 & \text { Miscellaneous expense } \
\hline 1320 & \text { Buildings and equipment (B\&E) } & 6220 & \text { Depreciation expense } \
\hline 1325 & \text { Accumulated depreciation-B\&E } & 6230 & \text { Insurance expense } \
\hline 2110 & \text { Short-term notes payable } & 6240 & \text { Property tax expense } \
\hline 2120 & \text { Interest payable } & 6250 & \text { Rent expense } \
\hline 2130 & \text { Accounts payable } & 6260 & \text { Supplies expense } \
\hline 2140 & \text { Deferred revenue } & 6270 & \text { Salaries and wages expense } \
\hline 2150 & \text { Salaries and wages payable } & 6400 & \text { Interest expense } \
\hline 2160 & \text { Dividends payable } & 6999 & \text { Income summary account } \
\hline
\end{array}\] 
Required:

Using the chart of accounts provided, indicate by account number the account or accounts that would be debited and credited in the following transactions. Also enter the number 1, 2, or 3 to indicate the type of transaction as: (1) an external transaction, (2) an internal transaction recorded as an adjusting journal entry, or (3) a closing entry. The company uses a perpetual inventory system. All prepayments are initially recorded in permanent accounts

-Purchased building and equipment for $10,000,000, paying 20% cash and issuing a 30-year note for the balance.

Accepted Answer

The answer of \[\begin{array} { | l | l |...

Question 5

You are reviewing O'Brian Co.'s adjusted trial balance for the year ended 12/31/18. You notice several omissions and incorrect items during your review, some of which are noted below. For each one, you are to determine what effect, if any, these items would have on the stated components of O'Brian Co.'s 2018 Income Statement and 12/31/18 Balance Sheet if they are not corrected or updated. Assume no income taxes.

Use the following code for your answers. You need not include any dollar amounts.
N = No Effect
O = Overstated
U = Understated

-

Accepted Answer

The answer of You are reviewing O'Brian Co.'s adjusted trial...

Question 6

On December 31, 2018, 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 2018 balance sheet will be valued at:

Accepted Answer

A)  $53,600. 
B)  $54,800. 
C)  $52,400. 
D)  $1,200.

Question 7

You are reviewing O'Brian Co.'s adjusted trial balance for the year ended 12/31/18. You notice several omissions and incorrect items during your review, some of which are noted below. For each one, you are to determine what effect, if any, these items would have on the stated components of O'Brian Co.'s 2018 Income Statement and 12/31/18 Balance Sheet if they are not corrected or updated. Assume no income taxes.

Use the following code for your answers. You need not include any dollar amounts.
N = No Effect
O = Overstated
U = Understated

-

Accepted Answer

The answer of You are reviewing O'Brian Co.'s adjusted trial...

Question 8

-Prepare an income statement for China Tea Company for the year ended December 31, 2018.

Accepted Answer

The answer of 
-Prepare an income statement for China Tea...

Question 9

\[\begin{array} { | l | l | l | l | } 
\hline 1100 & \text { Cash } & 2170 & \text { Property taxes payable } \
\hline 1120 & \text { Short-term investments } & 2180 & \text { Rent payable } \
\hline 1130 & \text { Notes receivable } & 2200 & \text { Long-term notes payable } \
\hline 1140 & \text { Accounts receivable } & 3100 & \text { Common stock } \
\hline 1145 & \text { Loan receivable } & 3200 & \text { Retained earnings } \
\hline 1150 & \text { Interest receivable } & 5000 & \text { Sales revenue } \
\hline 1160 & \text { Other accrued receivables } & 5300 & \text { Interest revenue } \
\hline 1200 & \text { Inventory } & 6000 & \text { Cost of goods sold } \
\hline 1250 & \text { Supplies } & 6200 & \text { Advertising expense } \
\hline 1260 & \text { Prepaid expenses } & 6210 & \text { Miscellaneous expense } \
\hline 1320 & \text { Buildings and equipment (B\&E) } & 6220 & \text { Depreciation expense } \
\hline 1325 & \text { Accumulated depreciation-B\&E } & 6230 & \text { Insurance expense } \
\hline 2110 & \text { Short-term notes payable } & 6240 & \text { Property tax expense } \
\hline 2120 & \text { Interest payable } & 6250 & \text { Rent expense } \
\hline 2130 & \text { Accounts payable } & 6260 & \text { Supplies expense } \
\hline 2140 & \text { Deferred revenue } & 6270 & \text { Salaries and wages expense } \
\hline 2150 & \text { Salaries and wages payable } & 6400 & \text { Interest expense } \
\hline 2160 & \text { Dividends payable } & 6999 & \text { Income summary account } \
\hline
\end{array}\] 
Required:

Using the chart of accounts provided, indicate by account number the account or accounts that would be debited and credited in the following transactions. Also enter the number 1, 2, or 3 to indicate the type of transaction as: (1) an external transaction, (2) an internal transaction recorded as an adjusting journal entry, or (3) a closing entry. The company uses a perpetual inventory system. All prepayments are initially recorded in permanent accounts

-Sold inventory for cash.

Accepted Answer

The answer of \[\begin{array} { | l | l |...

Question 10

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?

Accepted Answer

A)  $290,000. 
B)  $294,000. 
C)  $300,000. 
D)  $306,000.

Question 11

The post-closing trial balance contains only permanent accounts.

Accepted Answer

A) True 
 B)False

Question 12

After an unadjusted trial balance is prepared, the next step in the accounting processing cycle is the preparation of financial statements.

Accepted Answer

A) True 
 B)False

Question 13

XYZ Corporation receives $100,000 from investors for issuing them shares of its stock. XYZ's journal entry to record this transaction would include a:

Accepted Answer

A)  Debit to investments. 
B)  Credit to retained earnings. 
C)  Credit to common stock. 
D)  Credit to revenue.

Question 14

\[\begin{array} { | l | l | l | l | } 
\hline 1100 & \text { Cash } & 2170 & \text { Property taxes payable } \
\hline 1120 & \text { Short-term investments } & 2180 & \text { Rent payable } \
\hline 1130 & \text { Notes receivable } & 2200 & \text { Long-term notes payable } \
\hline 1140 & \text { Accounts receivable } & 3100 & \text { Common stock } \
\hline 1145 & \text { Loan receivable } & 3200 & \text { Retained earnings } \
\hline 1150 & \text { Interest receivable } & 5000 & \text { Sales revenue } \
\hline 1160 & \text { Other accrued receivables } & 5300 & \text { Interest revenue } \
\hline 1200 & \text { Inventory } & 6000 & \text { Cost of goods sold } \
\hline 1250 & \text { Supplies } & 6200 & \text { Advertising expense } \
\hline 1260 & \text { Prepaid expenses } & 6210 & \text { Miscellaneous expense } \
\hline 1320 & \text { Buildings and equipment (B\&E) } & 6220 & \text { Depreciation expense } \
\hline 1325 & \text { Accumulated depreciation-B\&E } & 6230 & \text { Insurance expense } \
\hline 2110 & \text { Short-term notes payable } & 6240 & \text { Property tax expense } \
\hline 2120 & \text { Interest payable } & 6250 & \text { Rent expense } \
\hline 2130 & \text { Accounts payable } & 6260 & \text { Supplies expense } \
\hline 2140 & \text { Deferred revenue } & 6270 & \text { Salaries and wages expense } \
\hline 2150 & \text { Salaries and wages payable } & 6400 & \text { Interest expense } \
\hline 2160 & \text { Dividends payable } & 6999 & \text { Income summary account } \
\hline
\end{array}\] 
Required:

Using the chart of accounts provided, indicate by account number the account or accounts that would be debited and credited in the following transactions. Also enter the number 1, 2, or 3 to indicate the type of transaction as: (1) an external transaction, (2) an internal transaction recorded as an adjusting journal entry, or (3) a closing entry. The company uses a perpetual inventory system. All prepayments are initially recorded in permanent accounts

-Purchased inventory on account.

Accepted Answer

The answer of \[\begin{array} { | l | l |...

Question 15

The Hamada Company sales for 2018 totaled $150,000 and purchases totaled $95,000. Selected January 1, 2018, balances were: accounts receivable, $18,000; inventory, $14,000; and accounts payable, $12,000. December 31, 2018, balances were: accounts receivable, $16,000; inventory, $15,000; and accounts payable, $13,000. Net cash flows from these activities were:

Accepted Answer

A)  $45,000. 
B)  $55,000. 
C)  $58,000. 
D)  $74,000.

Question 16

Accruals occur when cash flows:

Accepted Answer

A)  Occur before expense recognition. 
B)  Occur after revenue or expense recognition. 
C)  Are uncertain. 
D)  May be substituted for goods or services.

Question 17

Prepare journal entries to record the following transactions of Daisy King Ice Cream Company. If an entry is not required, state "No Entry."
1. Started business by issuing 10,000 shares of common stock for $20,000.
2. Signed a franchise agreement to pay royalties of 5% of sales.
3. Leased a building for three years at $500 per month and paid six months' rent in advance.
4. Purchased equipment for $5,400, paying $1,000 down and signing a two-year, 10% note for the balance.
5. Purchased $1,800 of supplies on account.
6. Recorded cash sales of $800 for the first week.
7. Paid weekly salaries and wages, $320.
8. Paid for supplies purchased in item (5).
9. Paid royalties due on first week's sales.
10. Recorded depreciation on equipment, $50.

Accepted Answer

The answer of Prepare journal entries to record the following...

Question 18

Mama's Pizza Shoppe borrowed $8,000 at 9% interest on May 1, 2018, with principal and interest due on October 31, 2019. The company's fiscal year ends June 30, 2018. What adjusting entry is necessary on June 30, 2018?

Accepted Answer

A)  No entry. 
B)  $\begin{array}{|l|l|l|}
\hline \text { Interest expense } & 240 & \
\hline \text { Interest payable } & & 240 \
\hline
\end{array}$ 
C)  $\begin{array}{|l|l|l|}
\hline \text { Interest expense } & 120 & \
\hline \text { Interest payable } & & 120 \
\hline
\end{array}$ 
D)  $\begin{array}{|l|l|l|}
\hline \text { Prepaid interest } & 120 & \
\hline \text { Interest payable } & & 120 \
\hline
\end{array}$

Question 19

Flint Hills, Inc. has prepared a year-end 2018 trial balance. Certain accounts in the trial balance do not reflect all activities that have occurred.
Required:
Prepare adjusting journal entries, as needed, for the following items.
1. The Supplies account shows a balance of $540, but a count of supplies reveals only $210 on hand.
2. Flint Hills initially records the payments of all insurance premiums as expenses. The trial balance shows a balance of $420 in Insurance expense. A review of insurance policies reveals that $125 of insurance is unexpired.
3. Flint Hills employees work Monday through Friday, and salaries of $2,400 per week are paid each Friday. Flint Hills' year-end falls on Tuesday.
4. On December 31, 2018, Flint Hills received a utility bill for December electricity usage of $190 that will be paid in early January of 2019.

Accepted Answer

The answer of Flint Hills, Inc. has prepared a year-end...

Exam 2: Review of the Accounting Process

The accounting equation can be stated as:

-Prepare a classified balance sheet for China Tea Company as of December 31, 2018.

Prepayments occur when:

On December 31, 2018, 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 2018 balance sheet will be valued at:

-Prepare an income statement for China Tea Company for the year ended December 31, 2018.

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?

The post-closing trial balance contains only permanent accounts.

After an unadjusted trial balance is prepared, the next step in the accounting processing cycle is the preparation of financial statements.

XYZ Corporation receives $100,000 from investors for issuing them shares of its stock. XYZ's journal entry to record this transaction would include a:

Accruals occur when cash flows:

Mama's Pizza Shoppe borrowed $8,000 at 9% interest on May 1, 2018, with principal and interest due on October 31, 2019. The company's fiscal year ends June 30, 2018. What adjusting entry is necessary on June 30, 2018?