AC211DE 19S1 MODULE Other receivables represents the amount A) customers owe for goods or services previously delivered B) collected in advance of performing the services C) lent to others D) borrowed from others Slumbers, Inc borrows $3,000 at 12 from a bank on September 1, 2012 and agrees to pay the interest and principal in two years What is the effect on the accounting equation of the adjusting entry to record interest for the year ended December 31, 2012 A) Assets will increase by $3,000 B) Liabilities will decrease by $120 C) Shareholders equity will decrease by $120 D) Cash will decrease by $120 What type of account is Unearned revenue A) an asset B) a liability C) a revenue D) part of shareholders equity The Unearned revenue account represents the amount of A) cash paid to customers during the period B) cash collected from customers during a period C) goods and services sold to customers during a period D) goods and services that a company owes its customers Hen House, Inc collects all subscription revenue in advance At December 31, 2011, the company owed $50,000 to customers for unearned revenue During 2012, the company received $150,000 in advance from its customers and delivered $190,000 of magazines to its customers How much unearned revenue will Hen House report on its balance sheet at December 31, 2012 A) $200,000 B) $190,000 C) $10,000 D) $210,000 Clean Sweep, Inc started the month of June with $800 worth of cleaning supplies During the month, Clean Sweep purchased $300 of supplies for cash At June 30, $200 worth of supplies was unused How will the company report its unused supplies on June 30 A) $200 of unused supplies will appear as an expense on the income statement B) $900 of unused supplies will appear as an expense on the income statement C) $200 of unused supplies will appear as an asset on the balance sheet D) $900 of unused supplies will appear as an asset on the balance sheet Which financial statement shows Cash collected from customers A) income statement B) statement of changes in shareholders equity C) statement of cash flows D) balance sheet Miss Happ of Ace Electronics forgot to make the adjusting entry for depreciation on the companys equipment As a result of this mistake A) total liabilities are too low B) net income is too high C) net income is too low D) shareholders equity is too low Which of the following accounts typically needs to be adjusted A) Cash B) Land C) Unearned revenue D) Common stock Learning Objective 3 5 Use the following information from Hormel Foods Corporations income statement to calculate the companys 2012 profit margin on sales ratio (in thousands) Fiscal Year Ended October 26, 2012 October 28, 2011 Net sales $6,754,903 $6,193,032 Net income $285,500 $301,892 A) 23 7 B) 4 2 C) 4 4 D) 5 0 Use the following information from Hot Spots, Inc s income statement to calculate the companys 2012 profit margin on sales ratio December 31, 2012 December 31, 2011 Net sales $6,000,000 $4,000,000 Net income $600,000 $500,000 A) 10 0 B) 12 0 C) 12 5 D) 20 0 Learning Objective 3 6 Which of the following risks is NOT associated with financial information A) errors in recording and updating the financial accounting information B) unauthorized access to the financial accounting records C) loss of the data in the financial accounting records D) loss of product quality A computerized accounting system stores duplicate accounting data in a secure, remote location This control is primarily designed to prevent A) errors in recording and updating the financial accounting information B) unauthorized access to the financial accounting records C) loss of the data in the financial accounting records D) incorrect acceptance of material items An accounting clerk compares a bill received from a supplier with the packing slip that accompanied the shipment from the supplier This control is primarily designed to prevent A) errors in recording and updating the financial accounting information B) unauthorized access to the financial accounting records C) loss of the data in the financial accounting records D) incorrect acceptance of material items Learning Objective 4 2 Cash is found on the A) Income statement B) Balance sheet C) Statement of changes in shareholders equity D) Statement of operations Which of these is a cash equivalent A) U S treasury bills that mature in three months or less B) a note receivable that matures in six months C) a note payable due in three months or less D) accounts receivable due in three months or less Accounts receivable are A) current assets B) current liabilities C) long term assets D) long term liabilities Which of the following methods of accounting for uncollectible accounts matches sales with bad debts expense A) direct write off method B) allowance method C) contra asset method D) reconciliation method The allowance for uncollectible accounts is a(n) A) contra expense account B) contra revenue account C) contra asset account D) expense account Which of the following statements is FALSE about the allowance method for uncollectible accounts A) Bad debt expense is estimated and matched with sales B) Expense is recorded during end of the period adjustments C) This method is not acceptable under GAAP D) The method is acceptable under GAAP What is the effect on the accounting equation when a company collects an account receivable A) Total assets increase, total liabilities increase, and total shareholders equity stays the same B) Total assets stay the same, total liabilities stay the same, and total shareholders equity stays the same C) Total assets decrease, total liabilities stay the same, and total shareholders equity decreases D) Total assets stay the same, total liabilities increases, and total shareholders equity decreases Credit card sales benefit companies because A) the risk of uncollectible accounts is transferred to credit card companies B) fewer customers will be able to buy products or services C) the credit card company is not responsible for evaluating customers credit worthiness D) they will receive less than the full amount of the sale from the credit card company Team Shirts decided to accept bankcards from credit customers Team Shirts should expect A) an increase in its allowance for uncollectible accounts B) a decrease in its bad debts expense C) a decrease in its credit card expense D) an increase in its write off of specific customer accounts Magic Cow Co made a sale for $5,000 to a customer who paid with MasterCard MasterCard charges Magic Cow a fee of 3 of sales MasterCard will directly deposit the cash from this sale within 24 hours How much cash will MasterCard deposit A) $5,000 B) $4,850 C) $150 D) $5,150 Magic Cow Co made a sale for $5,000 to a customer who paid with MasterCard MasterCard charges Magic Cow a fee of 3 of sales How much sales revenue will Magic Cow record A) $5,000 B) $4,850 C) $150 D) $5,150 Ace Electronics accepted a promissory note from Fenstermaker, who promised to pay Ace $2,000 plus 6 interest at the end of six months What is the amount of interest that will be paid at the end of the six month period A) $120 B) $240 C) $60 D) $2,060 Ace Electronics accepted a promissory note from Fenstermaker, who promised to pay Ace $2,000 plus 6 interest at the end of six months When Ace first accepts the note, it should record interest receivable of A) $120 B) $0 C) $60 D) $240

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AC211DE_19S1 MODULE Other receivables represents the amount ________. A) customers owe for goods or services previously delivered B) collected in advance of performing the services

AC211DE_19S1 MODULE

Other receivables represents the amount ________.

A) customers owe for goods or services previously delivered

B) collected in advance of performing the services

C) lent to others

D) borrowed from others

Slumbers, Inc. borrows $3,000 at 12% from a bank on September 1, 2012 and agrees to pay the interest and principal in two years. What is the effect on the accounting equation of the adjusting entry to record interest for the year ended December 31, 2012?

A) Assets will increase by $3,000.

B) Liabilities will decrease by $120.

C) Shareholders equity will decrease by $120.

D) Cash will decrease by $120.

What type of account is Unearned revenue?

A) an asset

B) a liability

C) a revenue

D) part of shareholders equity

The Unearned revenue account represents the amount of ________.

A) cash paid to customers during the period

B) cash collected from customers during a period

C) goods and services sold to customers during a period

D) goods and services that a company owes its customers

Hen House, Inc. collects all subscription revenue in advance. At December 31, 2011, the company owed $50,000 to customers for unearned revenue. During 2012, the company received $150,000 in advance from its customers and delivered $190,000 of magazines to its customers. How much unearned revenue will Hen House report on its balance sheet at December 31, 2012?

A) $200,000

B) $190,000

C) $10,000

D) $210,000

Clean Sweep, Inc. started the month of June with $800 worth of cleaning supplies. During the month, Clean Sweep purchased $300 of supplies for cash. At June 30, $200 worth of supplies was unused. How will the company report its unused supplies on June 30?

A) $200 of unused supplies will appear as an expense on the income statement.

B) $900 of unused supplies will appear as an expense on the income statement.

C) $200 of unused supplies will appear as an asset on the balance sheet.

D) $900 of unused supplies will appear as an asset on the balance sheet.

Which financial statement shows Cash collected from customers?

A) income statement

B) statement of changes in shareholders equity

C) statement of cash flows

D) balance sheet

Miss Happ of Ace Electronics forgot to make the adjusting entry for depreciation on the companys equipment. As a result of this mistake ________.

A) total liabilities are too low

B) net income is too high

C) net income is too low

D) shareholders equity is too low

Which of the following accounts typically needs to be adjusted?

A) Cash

B) Land

C) Unearned revenue

D) Common stock

Learning Objective 3-5

Use the following information from Hormel Foods Corporations income statement to calculate the companys 2012 profit margin on sales ratio.

(in thousands)	Fiscal Year Ended
	October 26, 2012	October 28, 2011
Net sales	$6,754,903	$6,193,032
Net income	$285,500	$301,892

A) 23.7%

B) 4.2%

C) 4.4%

D) 5.0%

Use the following information from Hot Spots, Inc.s income statement to calculate the companys 2012 profit margin on sales ratio.

	December 31, 2012	December 31, 2011
Net sales	$6,000,000	$4,000,000
Net income	$600,000	$500,000

A) 10.0%

B) 12.0%

C) 12.5%

D) 20.0%

Learning Objective 3-6

Which of the following risks is NOTassociated with financial information?

A) errors in recording and updating the financial accounting information

B) unauthorized access to the financial accounting records

C) loss of the data in the financial accounting records

D) loss of product quality

A computerized accounting system stores duplicate accounting data in a secure, remote location. This control is primarily designed to prevent ________.

A) errors in recording and updating the financial accounting information

B) unauthorized access to the financial accounting records

C) loss of the data in the financial accounting records

D) incorrect acceptance of material items

An accounting clerk compares a bill received from a supplier with the packing slip that accompanied the shipment from the supplier. This control is primarily designed to prevent ________.

A) errors in recording and updating the financial accounting information

B) unauthorized access to the financial accounting records

C) loss of the data in the financial accounting records

D) incorrect acceptance of material items

Learning Objective 4-2

Cash is found on the ________.

A) Income statement

B) Balance sheet

C) Statement of changes in shareholders equity

D) Statement of operations

Which of these is a cash equivalent?

A) U.S. treasury bills that mature in three months or less

B) a note receivable that matures in six months

C) a note payable due in three months or less

D) accounts receivable due in three months or less

Accounts receivable are ________.

A) current assets

B) current liabilities

C) long-term assets

D) long-term liabilities

Which of the following methods of accounting for uncollectible accounts matches sales with bad debts expense?

A) direct write-off method

B) allowance method

C) contra-asset method

D) reconciliation method

The allowance for uncollectible accounts is a(n) ________.

A) contra-expense account

B) contra-revenue account

C) contra-asset account

D) expense account

Which of the following statements is FALSEabout the allowance method for uncollectible accounts?

A) Bad debt expense is estimated and matched with sales.

B) Expense is recorded during end of the period adjustments.

C) This method is not acceptable under GAAP.

D) The method is acceptable under GAAP.

What is the effect on the accounting equation when a company collects an account receivable?

A) Total assets increase, total liabilities increase, and total shareholders equity stays the same.

B) Total assets stay the same, total liabilities stay the same, and total shareholders equity stays the same.

C) Total assets decrease, total liabilities stay the same, and total shareholders equity decreases.

D) Total assets stay the same, total liabilities increases, and total shareholders equity decreases.

Credit card sales benefit companies because ________.

A) the risk of uncollectible accounts is transferred to credit card companies

B) fewer customers will be able to buy products or services

C) the credit card company is not responsible for evaluating customers credit-worthiness

D) they will receive less than the full amount of the sale from the credit card company

Team Shirts decided to accept bankcards from credit customers. Team Shirts should expect ________.

A) an increase in its allowance for uncollectible accounts

B) a decrease in its bad debts expense

C) a decrease in its credit card expense

D) an increase in its write-off of specific customer accounts

Magic Cow Co. made a sale for $5,000 to a customer who paid with MasterCard. MasterCard charges Magic Cow a fee of 3% of sales. MasterCard will directly deposit the cash from this sale within 24 hours. How much cash will MasterCard deposit?

A) $5,000

B) $4,850

C) $150

D) $5,150

Magic Cow Co. made a sale for $5,000 to a customer who paid with MasterCard. MasterCard charges Magic Cow a fee of 3% of sales. How much sales revenue will Magic Cow record?

A) $5,000

B) $4,850

C) $150

D) $5,150

Ace Electronics accepted a promissory note from Fenstermaker, who promised to pay Ace $2,000 plus 6% interest at the end of six months. What is the amount of interest that will be paid at the end of the six-month period?

A) $120

B) $240

C) $60

D) $2,060

Ace Electronics accepted a promissory note from Fenstermaker, who promised to pay Ace $2,000 plus 6% interest at the end of six months. When Ace first accepts the note, it should record interest receivable of ________.

A) $120

B) $0

C) $60

D) $240