Problem Set # 8

41 Questions | Total Attempts: 110

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Problem Quizzes & Trivia

Journal Entires--Balance sheet, Transaction Analysis--Balance Sheet, Accrual Accounting, Journal Entries--Income statement, Transaction Analysis--Income statement, Journal Entries, Closing the books


Questions and Answers
  • 1. 
    A company paid $100,000 of invoices for inventory that was originally purchased on credit. The company paid the invoices in time to take advantage of a 15% early payment discount. The company treats discounts as a reduction in inventory value. How will this transaction be recorded?
    • A. 

      Debit accounts payable $100,000; credit inventory $15,000; credit cash $85,000

    • B. 

      Debit accounts payable $85,000; credit cash $85,000

    • C. 

      Debit inventory $100,000; credit accounts payable $100,000

    • D. 

      Debit cash $85,000; debit inventory $15,000; credt accounts payable $100,000

    • E. 

      None of the above

  • 2. 
    When a company recorded a transaction it debited an asset and credited a liability. Which of the following explanations best describes the transaction?
    • A. 

      The company purchased inventory on account

    • B. 

      The company paid for inventory previously purchased on account

    • C. 

      The company paid off a debt

    • D. 

      Company issued a new stock for cash

    • E. 

      None of the above

  • 3. 
    A company issued 20,000 shares of $1 par value common stock for $100,000. How will this transaction be recorded?
    • A. 

      Debit common stock $100,000; credit cash $100,000

    • B. 

      Debit cash $100,000; credit common stock $100,000

    • C. 

      Debit cash $100,000; credit common stock $20,000; credit additional paid-in capital $80,000

    • D. 

      Increase assets $100,000; increase equities $100,000

    • E. 

      None of the above

  • 4. 
    January 30, a company bought $360,000 of inventory on account. On February 4, the company discovered that $15,000 of the inventory was defective. The company returned the inventory and reduced the carrying value of inventory. What journal entry did the company make on January 30?
    • A. 

      Debit accounts payable $360,000; credit inventory $360,000

    • B. 

      Debit inventory $360,000; credit accounts payable $360,000

    • C. 

      Debit accounts payable $15,000; credit inventory $15,000

    • D. 

      Debit inventory $15,000; credit accounts payable $15,000

    • E. 

      None of the above

  • 5. 
    A company received a utility bill for $5,000 in October. The company plans to pay the bill in November. What entry, if any, will the company make in October?
    • A. 

      No entry

    • B. 

      Debit utility expense $5,000; credit cash $5,000

    • C. 

      Debit utility expense $5,000; credit accounts payable $5,000

    • D. 

      Debit accounts payable $5,000; credit cash $5,000

    • E. 

      None of the above

  • 6. 
    A company received a utility bill for $5,000 in October. The company paid the bill immediatly. What entry, if any, will the company make in October?
    • A. 

      No entry

    • B. 

      Debit utility expense $5,000; credit cash $5,000

    • C. 

      Debit utility expense $5,000; credit accounts payable $5,000

    • D. 

      Debit accounts payable $5,000; credit cash $5,000

    • E. 

      None of the above

  • 7. 
    A company bought $700,000 in raw materials. The company paid $100,000 with the remainder on account. How will this transaction be recorded?
    • A. 

      Debit cash $100,000; credit accounts receivable $600,000; credit inventory $700,000

    • B. 

      Debit cash $100,000 debit accounts payable $600,000; credit accounts receivable $600,000

    • C. 

      Debit inventory $700,000; credit cash $100,000; credit accounts receivable $600,000

    • D. 

      Debit inventory $700,000; credit cash $100,000; credit accounts payable $600,000

    • E. 

      None of the above

  • 8. 
    A company bought equipment with a value of $300,000. The company paid $50,000 down and signed a mortgage for the remaining amount. How will this transaction be recorded?
    • A. 

      Debit equipment $300,000; credit cash $50,000; credit mortgage payable $250,000

    • B. 

      Debit equipment $250,000; credit mortgage payable $250,000

    • C. 

      Debit cash $50,000; debit equipment $250,000; credit mortgage payable $300,000

    • D. 

      Debit mortgage payable $250,000; credit equipment $250,000

    • E. 

      None of the above

  • 9. 
    A company paid $3,600 for a 12-month insurance policy on March 1. Coverage begins April 1. On Mar 1, how will the transaction be recorded?
    • A. 

      Debit insurance expenses $3,600; credit cash $3,600

    • B. 

      Debit pre-paid insurance $3,600; credit cash $3,600

    • C. 

      Debit cash $3,600; credit insurance expense $3,600

    • D. 

      Debit cash $3,600; credit pre-paid insurance $3,600

    • E. 

      None of the above

  • 10. 
    Devon Company obtained fire and liability insurance coverage from Southwest Insurance Company. The three-year policy begins next month and carries a $6,000 premium that has not yet been paid. How will the company record this transaction?
    • A. 

      No journal entry is required

    • B. 

      Debit prepaid insurance $6,000; credit cash $6,000

    • C. 

      Debit prepaid insurance $6,000; credit accounts payable $6,000

    • D. 

      Debit prepaid insurance $6,000; credit insurance premium payable $6,000

    • E. 

      None of the above

  • 11. 
    Farrel Co. acquired a warehouse costing $90,000. The firm makes a down payment of $10,000 and assumes a long-term mortgage for the balance. How will the company record this transaction?
    • A. 

      Debit cash $10,000; debit warehouse $80,000; credit notes payable $90,000

    • B. 

      Debit warehouse $90,000; credit notes payable $80,000; credit cash $10,000

    • C. 

      Increase assets $80,000; increase equities $80,000

    • D. 

      Increase assets $80,000; increase liabilities $80,000

    • E. 

      None of the above

  • 12. 
    Dupree Corporation acquired raw materials with a list price of $90,000 on account from suppliers. How should the company record this transaction?
    • A. 

      Debit inventory $90,000; credit accounts payable $90,000

    • B. 

      Debit inventory $90,000; credit notes payalbe $90,000

    • C. 

      Debit inventory $90,000; credit cash $90,000

    • D. 

      Debit materials $90,000; credit accounts payable $90,000

    • E. 

      None of the above

  • 13. 
    A company paid a one-year $30,000 8% note in full with interest. How will this transaction be recorded?
    • A. 

      Debit notes payable $30,000; credit cash $30,000

    • B. 

      Debit notes payable $30,000; debit interest expense $2,400; credit cash $32,400

    • C. 

      Debit cash $30,000; credit notes payable $30,000

    • D. 

      Debit cash $32,400; credit interest expense $2,400; credit accounts payable $30,000

    • E. 

      None of the above

  • 14. 
    A company issued 100,000 shares of $1 par value common stock for $1,500,000. How will this transaction be recorded?
    • A. 

      Debit cash $1,500,000; credit common stock $100,000; credit paid-in capital in excess of par $1,400,000

    • B. 

      Debit common stock $100,000; debit paid-in capital in excess of par $1,400,000; credit cash $1,500,000

    • C. 

      Increase assets $1,500,000; Increase Equity $1,500,000

    • D. 

      Decrease assets $1,500,000; Decrease Equity $1,500,000

    • E. 

      None of the above

  • 15. 
    A company pays invoices for $50,000 of raw material purchased on account with an original list price of $50,000, after deducting a discount of 3% for prompt payment. The firm treats cash discounts as a reduction in the acquisition cost of raw materials. How will this transaction be recorded?
    • A. 

      Increase assets $48,500; increase liabilities $48,500

    • B. 

      Decrease assets $48,500; decrease liabilities $48,500

    • C. 

      Increase assets $50,000; increase liabilities $50,000

    • D. 

      Decrease assets $50,000; decrease liabilities $50,000

    • E. 

      None of the above

  • 16. 
    A company paid $40,000 for inventory. How will this transaction affect the fundamental accounting equation?
    • A. 

      No effect

    • B. 

      Increase assets, increase equities

    • C. 

      Debit cash; credit inventory

    • D. 

      Debit inventory; credit cash

    • E. 

      None of the above

  • 17. 
    A company sold $700,000 in merchandise that had an original cost of $450,000. The company received $600,000 in cash, with the remainder due the following month. How does this transaction affect the basic accounting equation?
    • A. 

      Debit cash $600,000; debit cost of goods sold $450,000; credit sales revenue $700,000; credit inventory $450,000

    • B. 

      Debit cash $600,000; debit accounts receivable $100,000; debit cost of goods sold $450,000; credit sales revenue $700,000; credit inventory $450,000

    • C. 

      Increase assets $700,000; increase equity $700,000

    • D. 

      Increase assets $250,000; increase equity $250,000

    • E. 

      None of the above

  • 18. 
    A company bought equipment with a value of $300,000. The company paid $50,000 down and signed a mortgage for the remaining amount. How will this transaction affect the basic accounting equation?
    • A. 

      Debit equipment $300,000; credit cash $50,000; credit mortgage payable $250,000

    • B. 

      Debit equipment $250,000; credit mortgage payable $250,000

    • C. 

      Increase assets $250,000; increase liabilities $250,000

    • D. 

      Increase assets $300,000; increase liabilities $300,000

    • E. 

      None of the above

  • 19. 
    A company received $6,000 from a customer in October for services it will provide in December. How will this transaction affect the basic accounting equation in October?
    • A. 

      Increase assets $6,000; increase liabilities $6,000

    • B. 

      Increase assets $6,000; increase equity $6,000

    • C. 

      Debit cash $6,000; credit unearned revenue $6,000

    • D. 

      Debit cash $6,000; credit service revenue $6,000

    • E. 

      None of the above

  • 20. 
    A company bought $700,000 in raw materials. The company paid $100,000 with the remainder on account. How will this transaction affect the fundamental accounting equation?
    • A. 

      Debit cash $100,000; credit accounts receivable $600,000; credit inventory $700,000

    • B. 

      Debit cash $100,000; debit accounts payable $600,000; credit accounts receivable $600,000

    • C. 

      Increase assets $700,000; increase liabilities $700,000

    • D. 

      Increase assets $600,000; increase liabilities $600,000

    • E. 

      None of the above

  • 21. 
    Robber Baron, Inc. issued 20,000 shares of $1 par-value common stock for $80,000. How will this transaction affect the company's basic accounting equation?
    • A. 

      Debit cash $80,000; credit common stock $80,000

    • B. 

      Debit cash $80,000; credit common stock $20,000; credit additional paid-in capital $60,000

    • C. 

      Increase assets $80,000; increase equity $80,000

    • D. 

      Increase assets $80,000; increase liabilities $80,000

    • E. 

      None of the above

  • 22. 
    Dupree Corporation paid $90,000 of invoices for raw materials it puchased last month on account. The original transaction was appropriately recorded. How will the payment affect the basic accounting equation?
    • A. 

      Debit accounts payable $90,000; credit cash $90,000

    • B. 

      Debit notes payable $90,000; credit cash $90,000

    • C. 

      Increase assets $90,000; increase liabilities $90,000

    • D. 

      Decrease assets $90,000; decrease liabilities $90,000

    • E. 

      None of the above

  • 23. 
    Gamgee Co. acquired a building with a cost of $1,000,000. The company paid a 20% down payment and signed a 30 year mortgage for the remaining balance. How will this transaction affect the basic accounting equation?
    • A. 

      Increase assets $1,000,000; increase liabilities $1,000,000

    • B. 

      Decrease assets $800,000; decrease liabilities $800,000

    • C. 

      Debit building $1,000,000; credit mortgage payable $1,000,000

    • D. 

      Debit building $1,000,000; credit mortgage payable $800,000; credit cash $200,000

    • E. 

      None of the above

  • 24. 
    A company paid a one-year $30,000 8% in full with interest. How will this transaction affect the basic accounting equation?
    • A. 

      Debit notes payable $30,000; credit cash $30,000

    • B. 

      Debit notes payable $30,000; debit interest expense $2,400; credit cash $32,400

    • C. 

      Decrease assets $30,000; decrease liabilities $30,000

    • D. 

      Decrease assets $32,400; decrease liabilities $30,000; decrease equity $2,400

    • E. 

      None of the above

  • 25. 
    A company purchased $60,000 of raw materials from a supplier on account. How will this transaction affect the basic accounting equation?
    • A. 

      Debit inventory $60,000; credit accounts receivable $60,000

    • B. 

      Debit inventory $60,000; credit accounts payable $60,000

    • C. 

      Increase inventory $60,000; increase accounts payable $60,000

    • D. 

      Increase assets $60,000; increase liabilities $60,000

    • E. 

      None of the above