This is my important final review for the test please give me a correct answers

Please explain your answers: 1. Which of the following should be included in the physical inventory of a company? A) Goods held on consignment from another company. B) Goods in transit to another company shipped FOB shipping point. C) Goods in transit from another company shipped FOB shipping point. D) Goods in transit to or from another company shipped FOB shipping point. 2. In a corporation, Retained Earnings is a part of stockholders' equity. A) True B) False 3. If goods in transit are shipped FOB destination A) the seller has legal title to the goods until they are delivered. B) the buyer has legal title to the goods until they are delivered. C) the transportation company has legal title to the goods while the goods are in transit. D) no one has legal title to the goods until they are delivered. (L), land improvements (LI), buildings (B), equipment (E), or none of these (X). 4. Indicate whether each of the following expenditures should be classified as land 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Parking lots Electricity used by a machine Excavation costs Interest on building construction loan Cost of trial runs for machinery Drainage costs Cost to install a machine Fences Unpaid (past) property taxes assumed Cost of tearing down a building when land and a building on it are purchased Page 1 5. Teenage Fanclub Printings sold annual subscriptions to their magazine for $30,000 in December, 2014. The magazine is published monthly. The new subscribers received their first magazine in January, 2015. 1. What adjusting entry should be made in January if the subscriptions were originally recorded as a liability? 2. What amount will be reported on the January 2015 balance sheet for Unearned Subscription Revenue? 6. Alvarado Company purchased a new machine for $400,000. It is estimated that the machine will have a $40,000 salvage value at the end of its 5-year useful service life. The doubledeclining-balance method of depreciation will be used. Instructions Prepare a depreciation schedule which shows the annual depreciation expense on the machine for its 5-year life. 7. Under accrual-basis accounting A) cash must be received before revenue is recognized. B) net income is calculated by matching cash outflows against cash inflows. C) events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. D) the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles. 8. Some of the following errors would cause the debit and credit columns of the trial balance to have unequal totals. For each of the four cases, state whether the error would cause unequal totals in the trial balance. If the error causes unequal totals, indicate the amount of difference between the columns and state whether the debit or credit is larger. Each case is to be considered independently of the others. 1. A payment of $500 to a creditor was recorded by a debit to Accounts Payable of $50 and a credit to Cash of $500. 2. A $480 payment for a printer was recorded by a debit to Equipment of $48 and a credit to Cash for $48. 3. An account receivable in the amount of $2,500 was collected in full. The collection was recorded by a debit to Cash for $2,500 and a debit to Accounts Payable for $2,500. 4. An account payable was paid by issuing a check for $800. The payment was recorded by debiting Accounts Payable $800 and crediting Accounts Receivable $800. 9. Scotsman Company prepares monthly financial statements. Below are listed some selected accounts and their balances in the September 30 trial balance before any adjustments have been made for the month of September. SCOTSMAN COMPANY Trial Balance (Selected Accounts) September 30, 2015 Debit Supplies Prepaid Insurance Equipment Accumulated DepreciationEquipment Unearned Rent Revenue Credit $ 3,200 4,800 16,200 $1,000 1,200 (Note: Debit column does not equal credit column because this is a partial listing of selected account balances) An analysis of the account balances by the company's accountant provided the following additional information: 1. A physical count of supplies revealed $1,000 on hand on September 30. 2. A two-year life insurance policy was purchased on June 1 for $4,800. 3. Equipment depreciated $3,000 per year. 4. The amount of rent received in advance that remains unearned at September 30 is $500. Instructions Using the above additional information, prepare the adjusting entries that should be made by Scotsman Company on September 30. 10. The Duce Company has five plants nationwide that cost a total of $100 million. The current fair value of the plants is $500 million. The plants will be recorded and reported as assets at A) $100 million. B) $600 million. C) $400 million. D) $500 million. 11. The income statement for the month of June, 2015 of Camera Obscura Enterprises contains the following information: Revenues Expenses: Salaries and Wages Expense Rent Expense Advertising Expense Supplies Expense Insurance Expense Total expenses Net income $7,000 $3,000 1,500 800 300 100 5,700 $1,300 After the revenue and expense accounts have been closed, the balance in Income Summary will be A) $0. B) a debit balance of $1,300. C) a credit balance of $1,300. D) a credit balance of $7,000. 12. The income statement for the month of June, 2015 of Camera Obscura Enterprises contains the following information: Revenues Expenses: Salaries and Wages Expense Rent Expense Advertising Expense Supplies Expense Insurance Expense Total expenses Net income The entry to close the revenue account includes a A) debit to Income Summary for $1,300. B) credit to Income Summary for $1,300. C) debit to Income Summary for $7,000. D) credit to Income Summary for $7,000. $7,000 $3,000 1,500 800 300 100 5,700 $1,300 13. A plant asset was purchased on January 1 for $100,000 with an estimated salvage value of $20,000 at the end of its useful life. The current year's Depreciation Expense is $10,000 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is $50,000. The remaining useful life of the plant asset is A) 10 years. B) 8 years. C) 5 years. D) 3 years. 14. When purchasing land, the costs for clearing, draining, filling, and grading should be charged to a Land Improvements account. A) True B) False 15. Which of the following methods of computing depreciation is production based? A) Straight-line B) Declining-balance C) Units-of-activity D) None of these answer choices are correct. 16. Closing entries are necessary for A) permanent accounts only. B) temporary accounts only. C) both permanent and temporary accounts. D) permanent or real accounts only. 17. Identify the accounts to be debited and credited for each of the following transactions. 1. Invested $8,000 cash in the business in exchange for stock. 2. Purchased supplies on account for $1,000. 3. Billed customers $2,000 for services performed. 4. Paid salaries of $1,200. 18. In one closing entry, Dividends is credited and Income Summary is debited. A) True B) False 19. The book value of a plant asset is always equal to its fair market value. A) True B) False 20. The trial balance of Red House Painters shown below does not balance. RED HOUSE PAINTERS Trial Balance June 30, 2015 Cash Accounts Receivable Supplies Equipment Accounts Payable Common Stock Dividends Service Revenue Salaries and Wages Expense Maintenance and Repairs Expense Totals Debit $ 2,780 7,420 Credit 600 8,300 $ 9,777 1,952 1,300 15,200 3,800 1,600 $25,800 $26,929 An examination of the ledger and journal reveals the following errors: 1. Each of the above listed accounts has a normal balance per the general ledger. 2. Cash of $270 received from a customer on account was debited to Cash $720 and credited to Accounts Receivable $720. 3. A dividend of $400 was posted as a credit to Dividends $400 and credit to Cash $400. 4. A debit of $300 was not posted to Salaries and Wages Expense. 5. The purchase of equipment on account for $700 was recorded as a debit to Maintenance and Repairs Expense and a credit to Accounts Payable for $700. 6. Services were performed on account for a customer, $510, for which Accounts Receivable was debited $510 and Service Revenue was credited $51. 7. A payment on account for $235 was credited to Cash for $235 and credited to Accounts Payable for $253. Instructions Prepare a correct trial balance. 21. Financial information is presented below for two different companies. Sales revenue Sales returns and allowances Net sales Cost of goods sold Gross profit Operating expenses Income from operations Other expenses and losses Net income Gower Drugs $90,000 (a) 86,000 56,000 (b) 22,000 (c) 4,000 (d) Martini Food and Liquor $ (e) 3,000 95,000 (f) 36,000 (g) (h) 7,000 11,000 Instructions Determine the missing amounts. 22. The income statement for the year 2015 of Fugazi Co. contains the following information: Revenues Expenses: Salaries and Wages Expense Rent Expense Advertising Expense Supplies Expense Utilities Expense Insurance Expense Total expenses Net income (loss) The entry to close the revenue account includes a A) debit to Income Summary for $7,500. B) credit to Income Summary for $7,500. C) debit to Revenues for $70,000. D) credit to Revenues for $70,000. $70,000 $45,000 12,000 10,000 6,000 2,500 2,000 77,500 $(7,500) 23. Match the items below by entering the appropriate code letter in the space provided. A. B. C. D. E. Account Normal account balance Debit Revenue account Compound entry 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. F. G. H. I. J. Journal Posting Chart of accounts Trial balance Simple entry An entry that involves three or more accounts. Transferring journal entries to ledger accounts. The side which increases an account. A list of all the accounts used by an enterprise. A record of increases and decreases in specific assets, liabilities, and stockholders items. Left side of an account. An entry that involves only two accounts. A book of original entry. A list of accounts and their balances at a given time. Has a credit normal balance. 24. On November 2, 2014, Kasdan Company has cash sales of $6,000 from merchandise having a cost of $3,600. The entries to record the day's cash sales will include: A) a $3,600 credit to Cost of Goods Sold. B) a $6,000 credit to Cash. C) a $3,600 credit to Inventory. D) a $6,000 debit to Accounts Receivable. 25. Druganaut Company buys a $21,000 van on credit. The transaction will affect the A) income statement only. B) balance sheet only. C) income statement and retained earnings statement only. D) income statement, retained earnings statement, and balance sheet. 26. Farley Corporation purchased land adjacent to its plant to improve access for trucks making deliveries. Expenditures incurred in purchasing the land were as follows: purchase price, $70,000; broker's fees, $6,000; title search and other fees, $5,000; demolition of an old building on the property, $5,700; grading, $1,200; digging foundation for the road, $3,000; laying and paving driveway, $25,000; lighting $7,500; signs, $1,500. List the items and amounts that should be included in the Land account. 27. On December 31, 2015, Fashion Nugget Company prepared an income statement and balance sheet and failed to take into account three adjusting entries. The incorrect income statement showed net income of $35,000. The balance sheet showed total assets, $115,000; total liabilities, $45,000; and stockholders' equity, $70,000. The data for the three adjusting entries were: (1) Depreciation of $10,000 was not recorded on equipment. (2) Wages amounting to $7,000 for the last two days in December were not paid and not recorded. The next payroll will be in January. (3) Rent of $12,000 was paid for two months in advance on December 1. The entire amount was debited to Rent Expense when paid. Instructions Complete the following tabulation to correct the financial statement amounts shown (indicate deductions with parentheses): Item Net Income Total Assets Total Liabilities stockholders' Equity Incorrect balances $ 35,000 $115,000 $ 45,000 $ 70,000 Effects of: Depreciation Salaries Rent Correct Balances 28. On January 1, Chan & Chan, CPAs received a $15,000 cash retainer for accounting services to be rendered ratably over the next 3 months. The full amount was credited to the liability account Unearned Service Revenue. Assuming that the revenue is recognized equally over the 3-month period, what adjusting journal entry should be made at January 31? 29. Prepare adjusting entries for the following transactions. Omit explanations. 1. Depreciation on equipment is $900 for the accounting period. 2. There was no beginning balance of supplies and purchased $500 of supplies during the period. At the end of the period $150 of supplies were on hand. 3. Prepaid rent had a $1,000 normal balance prior to adjustment. By year end $400 was unexpired. 30. The ledger account balances for Galaxie 500 Company are listed below. Accounts Payable Accounts Receivable Cash Common stock Dividends Salaries and Wages Expense Service Revenue Unearned Service Revenue Utilities Expense $ 6,000 7,000 5,200 11,000 4,000 20,800 30,000 2,000 12,000 Instructions Prepare a trial balance in proper form for Galaxie at December 31, 2015. 31. During an accounting period, a business has numerous transactions affecting each of the following accounts. State for each account whether it is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries. (1) (2) (3) (4) (5) Advertising Expense Service Revenue Accounts Payable Accounts Receivable Common stock (6) (7) (8) (9) (10) Dividends Cash Salaries and Wages Expense Notes Payable Insurance Expense 32. Karley Company sold equipment on July 1, 2015 for $75,000. The equipment had cost $210,000 and had $120,000 of accumulated depreciation as of January 1, 2015. Depreciation for the first 6 months of 2015 was $12,000. Instructions Prepare the journal entry to record the sale of the equipment. 33. Which of the following statements is correct with respect to inventories? A) The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold. B) It is generally good business management to sell the most recently acquired goods first. C) Under FIFO, the ending inventory is based on the latest units purchased. D) FIFO seldom coincides with the actual physical flow of inventory. 34. Use the following income statement for the year 2015 for Belle Company to prepare entries to close the revenue and expense accounts for the company. Service revenue $85,000 Expenses: Salaries and Wages Expense $40,000 Rent Expense 12,500 Advertising Expense 8,700 Total expenses 61,200 Net income (loss) $ 23,800 35. The Income Summary account is an important account that is used A) during interim periods. B) in preparing adjusting entries. C) annually in preparing closing entries. D) annually in preparing correcting entries. 36. Carey Enterprises sold equipment on January 1, 2015 for $10,000. The equipment had cost $48,000. The balance in Accumulated Depreciation at January 1 is $40,000. What entry would Carey make to record the sale of the equipment? 37. Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transactions. 1. The company issues stock in exchange for $40,000 cash 2. Purchased $400 of supplies on credit. 3. Purchased equipment for $8,000, paying $2,000 in cash and signed a 30-day, $6,000, note payable. 4. Real estate commissions billed to clients amount to $4,000. 5. Paid $700 in cash for the current month's rent. 6. Paid $200 cash on account for supplies purchased in transaction 2. 7. Received a bill for $600 for advertising for the current month. 8. Paid $2,200 cash for office salaries and wages. 9. The company paid dividends of $1,500. 10. Received a check for $3,000 from a client in payment on account for commissions billed in transaction 4. 38. Match the following terms and definitions. a. Accounts receivable b. Creditor (1) (2) (3) (4) c. Accounts payable d. Note payable Amounts due from customers Amounts owed to suppliers for goods and services purchased Amounts owed to bank Party to whom money is owed 39. Which of the following expressions is incorrect? A) Gross profit - operating expenses = net income B) Sales revenue - cost of goods sold - operating expenses = net income C) Net income + operating expenses = gross profit D) Operating expenses - cost of goods sold = gross profit 40. A company just starting business made the following four inventory purchases in June: June 1 150 units $ 390 June 10 200 units 585 June 15 200 units 630 June 28 150 units 510 $2,115 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for June is A) B) C) D) $683. $825. $1,290. $1,432. 41. Misra Company compiled the following financial information as of December 31, 2015: Revenues $340,000 Retained earnings (1/1/15) 60,000 Equipment 80,000 Expenses 250,000 Cash 90,000 Dividends 20,000 Supplies 10,000 Accounts payable 40,000 Accounts receivable 70,000 Common stock 80,000 Misra's stockholders' equity on December 31, 2015 is A) $90,000. B) $140,000. C) $210,000. D) $250,000. 42. Presented below is information for Annie Company for the month of March 2015. Cost of goods sold Freight-out Insurance expense Salaries and wages expense $245,000 7,000 5,000 63,000 Rent expense Sales discounts Sales returns and allowances Sales revenue $ 36,000 8,000 11,000 410,000 Instructions (a) Prepare a multiple -step income statement. (b) Compute the gross profit rate. 43. Bakesale Enterprises purchased equipment on May 1, 2015 for $6,300. The company expects to use the equipment for 5 years. It has no salvage value. 1. What adjusting journal entry should the company make at the end of each month if monthly financials are prepared (annual depreciation is $1,260)? 2. What is the book value of the equipment at May 31, 2015? 44. The book value of a depreciable asset is always equal to its market value because depreciation is a valuation technique. A) True B) False 45. A company purchased factory equipment on April 1, 2015 for $160,000. It is estimated that the equipment will have a $20,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2015 is A) $16,000. B) $14,000. C) $10,500. D) $12,000. 46. An incorrect debit to Accounts Receivable instead of the correct account Notes Receivable does not require a correcting entry because total assets will not be misstated. A) True B) False 47. Grayson's Lumber Mill sold two machines in 2016. The following information pertains to the two machines: Purchase Useful Salvage Depreciation Sales Machine Cost Date Life Value Method Date Sold Price #1 $66,000 7/1/12 5 yrs. $6,000 Straight-line 7/1/16 $15,000 #2 $50,000 7/1/15 5 yrs. $5,000 Double-declining12/31/16 $30,000 balance Instructions (a) Compute the depreciation on each machine to the date of disposal. (b) Prepare the journal entries in 2016 to record 2016 depreciation and the sale of each machine. 48. Prepare journal entries for each of the following transactions. 1. Performed services for customers on account $8,000. 2. Purchased $20,000 of equipment on account. 3. Received $3,000 from customers in transaction 1. 4. The company paid dividends of $2,000. 49. Buffalo Tom Cruises purchased a five-year insurance policy for its ships on April 1, 2015 for $60,000. Assuming that April 1 is the effective date of the policy, the adjusting entry on December 31, 2015 is A) Prepaid Insurance 9,000 Insurance Expense 9,000 B) Insurance Expense Prepaid Insurance 9,000 Insurance Expense Prepaid Insurance 12,000 Insurance Expense Prepaid Insurance 3,000 9,000 C) 12,000 D) 3,000 50. State whether each situation is a prepaid expense (PE), unearned revenue (UR), accrued revenue (AR) or an accrued expense (AE). 1. Unrecorded interest on savings bonds is $245. 2. Property taxes that have been incurred but that have not yet been paid or recorded amount to $300. 3. Legal fees of $1,000 were collected in advance. By year end 60 percent were still unearned. 4. Prepaid insurance had a $500 balance prior to adjustment. By year end, 40 percent was still unexpired. 51. The steps in the accounting cycle are different for a merchandising company than for a service company. A) True B) False 52. The first-in, first-out (FIFO) inventory method results in an ending inventory valued at the most recent cost. A) True B) False 53. Inventory is A) reported under the classification of Property, Plant, and Equipment on the balance sheet. B) often reported as a miscellaneous expense on the income statement. C) reported as a current asset on the balance sheet. D) generally valued at the price for which the goods can be sold. 54. Post the following transactions to T-accounts and determine each account's ending balance. 1. 2. 3. 4. Supplies Accounts Payable Accounts Receivable Service Revenue Cash Accounts Receivable Accounts Payable Cash 2,800 2,800 4,000 4,000 3,000 3,000 1,000 1,000 55. A company just starting business made the following four inventory purchases in June: June 1 150 units $ 390 June 10 200 units 585 June 15 200 units 630 June 28 150 units 510 $2,115 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is A) $683. B) $825. C) $1,290. D) $1,432. 56. From the following list of selected accounts taken from the records of Ward Homeopathic Center, identify those that would appear on the balance sheet. a. Common Stock f. Accounts Payable b. Service Revenue g. Cash c. Land h. Rent Expense d. Salaries and Wages Expense i. Supplies e. Notes Payable j. Utilities Expense 57. The revenue recognition principle dictates that revenue be recognized in the accounting period in which cash is received. A) True B) False 58. Adjusting entries are not necessary if the trial balance debit and credit column balances are equal. A) True B) False 59. Jack's, a popular pizza hang-out, has a thriving delivery business. Jack's has a fleet of three delivery automobiles. Prior to making the entry for this year's depreciation expense, the subsidiary ledger for the fleet is as follows: Accumulated Estimated Depr.Beg. Miles Operated Car Cost Salvage Value Life in Miles of the Year During Year 1 $21,000 $3,000 75,000 $2,520 20,000 2 18,000 2,400 60,000 2,340 22,000 3 23,500 2,500 70,000 2,000 19,000 Instructions (a) Determine the depreciation rates per mile for each car. (b) Determine the depreciation expense for each car for the current year. (c) Make one compound journal entry to record the annual depreciation expense for the fleet. 60. In a perpetual inventory system, the Cost of Goods Sold account is used A) only when a cash sale of merchandise occurs. B) only when a credit sale of merchandise occurs. C) only when a sale of merchandise occurs. D) whenever there is a sale of merchandise or a return of merchandise sold