Question 1 (1.5 points)

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Chia Pet, Inc. owns a machine that it uses in its manufacturing process. Chia purchased the machine 4 years ago for $100,000. The depreciation on the machine for the first 4 years was calculated using the straight line method with no residual and a 5 year useful life. During the fifth year, Chia spends $10,000 in cash on an overhaul of the machine which was starting to wear out. Which of the following is true with regard to the overhaul?

Question 1 options:

1)	If the overhaul is determined to extend the useful life of the machine the $10,000 should be added to the machine account

2)	If the overhaul is determined to only fix the machine so that it will operated normally, then the $10,000 will increase expenses

3)	The recording of the overhaul will have no effect on the companys liabilities

4)	All of the above are true with regard to the overhaul

Question 2 (1.5 points)

When a corporation completes services for a customer according to an existing contract and the customer agrees to pay for those services in 60 days, the accounting equation will show what for the corporation?

Question 2 options:

1)	Stockholders Equity decreases

2)	Revenues increase

3)	Liabilities decrease

4)	Expenses increase

Question 3 (1.5 points)

Lifetime, Inc. has one long-term note payable outstanding on December 31, 2020 for 100,000. Monthly interest (no principal) payments are due on the 1^st of each month. The payment was last made on December 1, 2020 and the next payment will be made on January 1, 2021. If the interest rate on the loan is 12% per year and Lifetime fails to make the appropriate adjusting entry, what will be incorrect on the financial statements at the end of 2020?

Question 3 options:

1)	Interest payable will be too low by $1,000

2)	Interest expense will be too low by $12,000

3)	Interest payable will be too high by $12,000

4)	Notes payable will be too high by $1,000

Question 4 (1.5 points)

OK Buy sells gift cards in various denominations. The company likes to sell these because it receives the cash immediately, but knows that a certain percentage will never be redeemed for merchandise. On December 1, OK Buy had a balance in unearned revenue from sales of gift cards of $228,000. During December, OK Buy sold an additional $548,000 in gift cards. During December, $327,000 worth of gift cards were redeemed to purchase inventory that had originally cost OK Buy $190,000. On December 31, OK Buys accountant determines that 3 percent of the outstanding gift cards will never be redeemed for various reasons. She used past history to help determine this figure. The journal entry to record this adjustment will be:

Question 4 options:

1)	Debit Unredeemed Gift Cards $13,470 Credit Revenue $13,470

2)	Debit Revenue $16,440 Credit Unredeemed Gift Cards $16,440

3)	Debit Unredeemed Gift Cards $6,630 and Credit Revenue $6,630

4)	Debit Unredeemed Gift Cards $27,390 and Credit Revenue $27,390

Question 34 (1.5 points)

The sale of which of the following assets results in revenues being recorded?

Question 34 options:

1)	Property, plant and equipment

2)

Inventory

3)

Patents

4)	Accounts payable

Question 33 (1.5 points)

Company Y pays cash for an insurance policy on September 30, 2020 that will provide coverage for the next two years for its business operations. The adjusting entry on December 31, 2020 will result in what changes?

Question 33 options:

1)	Current liabilities will increase

2)	Current assets will stay the same

3)	Expenses will increase

4)	Revenues will increase

Question 32 (1.5 points)

Martin, Inc. purchased a piece of land for $30,000 on which it intended to build a warehouse. Two years later, Martin decided instead to lease an existing warehouse and sold the land for $40,000. Which of the following is true with regard to the sale of the land?

Question 32 options:

1)	The sale will result in a loss of $10,000 being recorded

2)	The sale will result in revenues of $40,000 being recorded

3)	The sale will result in a gain of $10,000 being recorded

4)	The sale will result in cost of goods sold of $30,000 being recorded

Question 31 (1.5 points)

The Orosco Company has 50 items in its inventory on June 6^th that each cost $42 when purchased. When the Orosco Company sells 30 of these items on June 9^th at a price of $75 each, which of the following is true?

Question 31 options:

1)	Gross Profit increases by $1,260

2)	Gross Profit increases by $1,550

3)	Gross Profit increases by $990

4)	Gross Profit decreases by $1,550