Question 9 (1.5 points)

Buck, Inc. sells inventory to customers with a two year embedded warranty that is not sold separately. During 2020 Buck sold 94,000 units of the products under warranty. Based on past experience Buck expects that 5% of the products will be returned for work that is covered during the 2 years and the average cost to fix these units will be $37 each. The adjusting entry for this embedded warranty for 2020 will be:

Question 9 options:

1)	Debit Warranty Expense $173,900 credit Warranty Liability $173,900

2)	Debit Warranty Expense $ 86,950 credit Warranty Liability $86,950

3)	Debit Warranty Liability $173,900 credit Warranty Expense $173,900

4)	Debit Warranty Liability $86,950 credit Cash $86,950

Question 10 (1.5 points)

The following purchases of widgets by Loopy Company took place during the 1^st Quarter of 2020:

Date	Units	Cost
01/20/2020	110	$30/each
02/15/2020	90	$32/each
03/12/2020	100	$33.50/each

If the only product Loopy sold during the first quarter was widgets and the only sale took place on February 18^th of 150 widgets for a sales price of $100 per unit, what was Happys gross profit for the first quarter using the FIFO assumption for inventory?

Question 10 options:

1)

$10,500

2)

$ 9,975

3)

$10,420

4)

$10,200

Question 1 (1.5 points)

Saved

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