QUESTION 21

Bimini, Inc. was recently formed with a $5,000 investment in the company by stockholders. The company then borrowed $2,000 from a local bank, purchased $1,000 of supplies on account, and also purchased $5,000 of equipment by paying $2,000 in cash and signing a promissory note for the balance. Based on these transactions, the company's total assets are: 1. $7,000

2. $9,000

3. $10,000

4. $11,000

5. None of the above.

QUESTION 22

Photo Plus, Inc. had $6,000 of supplies at the end of October. During November, the company bought $2,000 of supplies. At the end of November, the company had $1,000 of supplies remaining. Which of the following statements is true? 1. During November, the company used $7,000 of supplies.

2. The carrying value of supplies on November 30 should be $1,000.

3. An expense should be debited for $7,000 in November.

4. All of the above.

5. None of the above.

QUESTION 23

Bueno Yummo, Inc. had a beginning balance in its retained earnings account of $385,600. During the year, the company declared and paid a $4,700 dividend, and at the end of the year, it reported retained earnings of $399,860. The company's net income for the year was: 1. $14,260

2. $18,960

3. $9,560

4. $4,700

5. None of the above

QUESTION 24

BFI has a $5,000 Note Payable at December 31, 2016. The Note Payable is a 2 year, 9% (annual rate) note. The money was borrowed on September 1, 2015 principal and interest will be repaid to the bank on September 1, 2018. How much interest expense should BFI recognize in the Income Statement for the year ended December 31, 2016?

1. $150

2. $450

3. $900

4. $0

5. None of the above.

QUESTION 25

BFI had $100 of office supplies at January 1, 2016 and purchased $2,000 of office supplies during 2016. BFI has $750 of office supplies on the shelf at December 31, 2016. How much office supplies expense should BFI recognize in the Income Statement for the year ended December 31, 2016?

1. $1,350

2. $750

3. $2,100

4. $0

5. None of the above

QUESTION 26

On June 1, 2016, BFI paid $4,000 for a 24-month insurance policy effective July 1, 2016. What is the effect of the necessary adjusting journal entry?

1. Prepaid Insurance will decrease by $2,000.

2. Prepaid Insurance will decrease by $1,000.

3. Prepaid Insurance will increase by $2,000.

4. Prepaid Insurance will increase by $1,000.

5. Cash will decrease by $1,000.

QUESTION 27

The balance sheet of Vargas Company shows retained earnings of $50,000, total liabilities of $30,000, and common stock $10,000. Based on this information, you would know that: 1. the amount of ownership claims cannot be determined.

2. since the company began, the total amount of net income exceeded total dividends by $50,000.

3. the company obtained most of its assets through borrowing activities.

4. Vargas Company has enough cash to pay off its liabilities.

QUESTION 28

CPA Beach Monthly is a monthly accounting magazine. A 1 year subscription costs $20. 1,000 subscriptions were received and started in January. 600 subscriptions were received September 1 and started on October 1. This is the first year of operations. How much revenue should be recognized for the year ending December 31. 1. $23,000

2. $24,000

3. $32,000

4. $12,000

5. None of the above

QUESTION 29

Woodward Enterprises had the following events during 2016: The business issued $20,000 of common stock to its stockholders. The business purchased land for $12,000 cash. Services were provided to customers for $16,000 cash. Services were provided to customers for $6,000 on account. The company borrowed $16,000 from the bank. Operating expenses of $12,000 were incurred and paid in cash. Salary expense of $800 was accrued. A dividend of $4,000 was paid to the owners of Woodward Enterprises. Assuming the company began operations during 2016, the amount of retained earnings as of December 31, 2016 would be:

1. $5,200

2. $6,000

3. $10,000

4. $22,000