Midterm Sunday Prep Qs

Question 1

Total assets are $237,000, total liabilities are $181,000 and common stock is $18,000, what is retained earnings?

Answer 1

Retained Earnings 38,000 $

Question 2

What type of transactions are these: Operating, Investing or Financing? - Sale of common stock

Answer 2

Financing

Question 3

What type of transactions are these: Operating, Investing or Financing? - Sales to customers

Answer 3

Operating

Question 4

What type of transactions are these: Operating, Investing or Financing? - Purchase of land

Answer 4

Investing

Question 5

What type of transactions are these: Operating, Investing or Financing? - Repayment of principal on a loan from a bank

Answer 5

Financing

Question 6

What type of transactions are these: Operating, Investing or Financing? - Payment of dividends

Answer 6

Financing

Question 7

What type of transactions are these: Operating, Investing or Financing? - Payment of employee salaries

Answer 7

Operating

Question 8

What type of transactions are these: Operating, Investing or Financing? - Proceeds from sale of warehouse equipment

Answer 8

Investing

Question 9

What is one example of a type of company that would have COGS and Gross Profit shown on their income statement? And, what is a type of company that would not?

Answer 9

Ford Motor Company (any company that sells physical product), KPMG (public accounting firm)

Question 10

The following information has been provided by Walter Company: … How much were Walter’s operating expenses in deriving operating income?

Answer 10

$ 34,000

Question 11

Mabel Corporation makes fancy dog biscuits. A key customer, Pets Unlimited, has paid $2,000 in advance for 200 packages of the Halloween biscuits, expected to be delivered before the spooky season. On October 25, 2022 Mabel delivers 137 packages to Pets Unlimited. What is the amount of revenue Mabel has earned from this transaction in October? What is the value of the biscuit revenue she still has yet to earn?

Answer 11

Earned 1,370 $, Unearned 630 $

Question 12

On August 1, 2022, Larry Company paid $2,800 for nine months of rent with the office building landlord. As of December 31, 2022, what would the account balances be for Prepaid Rent and Rent Expense if all proper adjusting entries had been made?

Answer 12

Prepaid 1,244 $, Expense 1,556 $

Question 13

How does the payment of dividends impact the accounting equation?

Answer 13

Assets (cash) decreases, Equity (retained earnings) decreases

Question 14

On November 15, 2021, Crescent Company signed a $150,000, 9 percent note payable. The principal and interest will be paid on May 15, 2022. How much interest expense should be reported on the income statement for the year ended December 31, 2021?

Answer 14

Expense 1,688 $

Question 15

What is the ending allowance for uncollectible account balance at December 31, 2020 and bad debt expense for 2020?

Answer 15

Allowance Needed 5,265

Question 16

During May, Odell sold 185 units. What was ending inventory at May 31st and cost of goods sold for the month of May using the weighted average cost flow assumption?

Answer 16

Ending Inventory: 25 305 $, COGS: 185 2,255 $

Question 17

On October 26, 2021, Ann Company purchased $8,000 of merchandise inventory on credit subject to terms of 3/15, n/30. Upon inspection of the goods Ann Company noted damage to some of the items, after contacting the vendor on October 31st, they agreed to return $600 of the goods. What is the amount of cash that Ann Company will pay the vendor on November 5th to settle the invoice?

Answer 17

Payment 7,178 $

Question 18

Which costs should not be included in inventory?

Answer 18

• Freight out for sales FOB Destination, - Inspection, - Sales commission paid to warehouse team, - Sales discount provided to customer for prompt payment, - Purchase discount take on invoice from inventory vendor

Question 19

Which type of inventory cost method (LIFO, FIFO or Weighted Average) will produce the lowest COGS in a period of decreasing prices?

Answer 19

LIFO

Question 20

What happens to a companies Gross Profit when they record bad debt expense as part of the year end adjustment process?

Answer 20

Nothing – bad debt expense does not impact gross profit

Question 21

If at year end the company fails to do the A/R allowance related adjustment, will net income be too high, too low or accurate?

Answer 21

Too high

Question 22

Three Rivers Company has provided the following information: … How much are Three River’s net sales?

Answer 22

Net Sales 114,000$

Question 23

Willamette Company pays its employees on the 7th of each month for the prior month. Assuming that salary expense is stable month to month and total salary expense through March 31, 2022 was $18,000, what is the adjustment needed on April 30th? (accounts and amounts)

Answer 23

Increase Salaries Payable $6,000, Increase Salary Expense $6,000

Question 24

On December 31, 2022, Raptor Company has 1,000 units of an inventory item, which cost $20 per unit when purchased earlier in the year. The selling price is $25 per unit. On December 30, 2022, it was determined that the cost to sell is $6 per unit. What is the amount, if any, of the lower of cost or market adjustment Raptor will make at year end?

Answer 24

Adjustment (1,000) $

Question 25

Coco Corporation has provided the following information: • Net Sales from customers were $224,000 • Operating expenses were $61,000 • Interest expense was $3,000 • COGS were $104,000 • Loss from sale of plant and equipment was $1,000 • Dividend payments to Coco’s stockholders were $8,000 • Income tax rate is 30%. How much was Coco’s net income?

Answer 25

Net income is calculated as: Net Sales - (COGS + Operating expenses + Interest expense + Loss from sale of plant and equipment + Taxes) = 224,000 - (104,000 + 61,000 + 3,000 + 1,000 + 0.30*(224,000 - 104,000 - 61,000 - 3,000 - 1,000))