Multiple-Choice: (worth 4 points each) Select the best answer for each of the following questions. Only one answer per question should be selected. There is no partial credit on multiple-choice questions. Important directions for multiple choice: After indicating your answer for each multiple-choice question, transfer your answers to the area below. Please use only capital letters. If Derek cannot determine your letter, no credit will be received. 1. 5. 2 6. 3. 7. 4. 1. On 9/1/20, Dabney Corp. provided services in exchange for a 2-year, 12% promissory note having a face value of $8,000. The note's face value plus accrued interest compounded annually is due to be paid back in two years (on 9/1/22). Dabney Corp. has a calendar year-end and uses the effective interest method. The entry to record accrued interest revenue on 12/31/20 should include a: A. Credit to "Interest Revenue" for $240. B. Credit to "Discount on Note Receivable" for $240. C. Debit to "Interest Receivable" for $320. D. Debit to "Discount on Note Receivable" for $320. 2. Which of the following should not be included in the Accounts Receivable balance reported on the balance sheet? A. Travel advance given to employees B. Postdated check from a customer C. NSF check from a customer D. IOU from an employee 3. When accounts receivables are factored with recourse, which party bears the burden of any uncollectible accounts (bad debts)? A. The seller of the receivables B. The buyer of the receivables 4. True or False: GAAP requires a company to record an estimate of its sales returns in the same accounting period the product was originally sold rather than in the accounting period in which the sales return actually occurs. A. True B. False Hoover Corp. had the following errors occur during 2020. Assume these errors have not been corrected. Error #1: Failed to accrue interest receivable on an interest-bearing note at the end of the year. Error #2: Failed to estimate bad debts at the end of the year. 5. What is the effect of Error #1 on Hoover's net income, total assets, total liabilities, and total stockholders' equity in 20X1? + Net Income Total Assets Total Liabilities Total Stockholders' Equity No affect Understated Overstated No affect B. Overstated Overstated No affect Overstated C. Understated Understated No affect Understated D. Understated No affect Overstated Understated E. Overstated Understated Understated No affect What is the effect of Error #2 on Hoover's net income, total assets, total liabilities, and total stockholders' equity in 20X1? A 6. A. B. C. D. E. Net Income No effect Understated Overstated Understated No effect Total Assets No effect Understated Overstated Overstated No effect Total Liabilities Overstated No effect No effect No effect Understated Total Stockholders' Equity Understated Understated Overstated Understated Overstated 7. Wolfpack Corp. set up a $500 petty cash fund on May 1, 2020. They replenish the petty cash fund at the end of each month. On May 31, the following is noted: Receipts for postage total $75 Receipts for meals total $140. $270 worth of petty cash remains in the fund. The May 31 entry to replenish the petty cash fund back to a $500 balance should include a: A. Debit to "Petty Cash" for $215. B. Debit to Cash Over and Short" for $15. C. Credit to "Cash Over and Short" for $55. D. Credit to "Meals Expenses" for $140. E. Debit to "Operating Expenses" for $230