Question 1

The income statement of Dolan Corporation for 2014 included the following items:  The following balances have been excerpted from Dolan Corporation's balance sheets:  The cash received for interest during 2014 was

Accepted Answer

To calculate the cash received for interest during 2014, we need to add the interest income and subtract the increase in interest receivable or add the decrease in interest receivable.

($80,000 + $160,000 + $20,000) - ($30,000 + $112,000) = $118,000

However, there is a discrepancy of $400 between the calculated amount and the answer choices. This could be due to rounding or a small error in the financial statements. The closest answer choice is B, $117,800, which is only $200 off from the calculated amount. Therefore, the best choice is B.

Question 2

During the first year of Wilkinson Co.'s operations, all purchases were recorded as assets. Supplies in the amount of $25,800 were purchased. Actual year-end supplies amounted to $5,600. The adjusting entry for store supplies will

Accepted Answer

The adjusting entry for store supplies will decrease the asset account for supplies by the difference between the purchase and the actual year-end supplies, which is $20,200 ($25,800 - $5,600). Since expenses increase with a debit entry, the adjusting entry will be a debit to Supplies Expense and a credit to Supplies for $20,200, increasing expenses by that amount. Therefore, the correct answer is B.

Question 3

Chen Company's account balances at December 31, 2014 for Accounts Receivable and the Allowance for Doubtful Accounts are $480,000 debit and $900 credit. Sales during 2014 were $1,650,000. It is estimated that 1% of sales will be uncollectible. The adjusting entry would include a credit to the allowance account for

Accepted Answer

To calculate the estimated amount of uncollectible accounts, we multiply sales by the estimated percentage: $1,650,000 x 1% = $16,500. This amount should be credited to the allowance account to increase the balance and account for the estimated uncollectible accounts. Therefore, the adjusting entry should include a credit to the allowance account for $16,500.

Question 4

Tate Company purchased equipment on November 1, 2014 and gave a 3-month, 9% note with a face value of $60,000. The December 31, 2014 adjusting entry is

Accepted Answer

The interest for two months (November and December) needs to be recorded. The interest is calculated as $60,000 x 9% x (2/12) = $900. Therefore, the adjusting entry is to debit Interest Expense and credit Interest Payable for $900.

Question 5

Starr Corporation loaned $450,000 to another corporation on December 1, 2014 and received a 3-month, 8% interest-bearing note with a face value of $450,000. What adjusting entry should Starr make on December 31, 2014?

Accepted Answer

The interest for one month (December) on a $450,000 loan at 8% annual interest is calculated as $450,000 * 8% * (1/12) = $3,000. Therefore, the correct adjusting entry is to debit Interest Receivable and credit Interest Revenue for $3,000, reflecting the accrued interest for December.

Question 6

Mune Company recorded journal entries for the declaration of $150,000 of dividends, the $96,000 increase in accounts receivable for services rendered, and the purchase of equipment for $63,000. What net effect do these entries have on owners' equity?

Accepted Answer

The declaration of dividends decreases owners' equity by $150,000. The increase in accounts receivable for services rendered increases owners' equity by $96,000. The purchase of equipment does not directly affect owners' equity. Therefore, the net effect is a decrease of $54,000 ($150,000 - $96,000).

Question 7

Murphy Company sublet a portion of its warehouse for five years at an annual rental of $60,000, beginning on May 1, 2014. The tenant, Sheri Charter, paid one year's rent in advance, which Murphy recorded as a credit to Unearned Rent Revenue. Murphy reports on a calendar-year basis. The adjustment on December 31, 2014 for Murphy should be

Accepted Answer

The answer of Murphy Company sublet a portion of its...

Question 8

Maso Company recorded journal entries for the issuance of common stock for $160,000, the payment of $52,000 on accounts payable, and the payment of salaries expense of $84,000. What net effect do these entries have on owners' equity?

Accepted Answer

The answer of Maso Company recorded journal entries for the...

Question 9

A reversing entry should never be made for an adjusting entry that

Accepted Answer

Adjusting entries for expired costs from an asset account to an expense account are made to record the consumption of an asset over a period. These adjustments reflect the actual expense incurred during the period and do not require reversal because they represent real economic events that do not reverse in the next period.

Question 10

The income statement of Dolan Corporation for 2014 included the following items:  The following balances have been excerpted from Dolan Corporation's balance sheets:  The cash paid for salaries and wages during 2014 was

Accepted Answer

The answer of The income statement of Dolan Corporation for...

Question 11

Big-Mouth Frog Corporation had revenues of $300,000, expenses of $200,000, and dividends of $45,000. When Income Summary is closed to Retained Earnings, the amount of the debit or credit to Retained Earnings is a

Accepted Answer

The answer of Big-Mouth Frog Corporation had revenues of $300,000,...

Question 12

The worksheet for Sharko Co. consisted of five pairs of debit and credit columns. The dollar amount of one item appeared in both the credit column of the income statement section and the debit column of the balance sheet section. That item is

Accepted Answer

The answer of The worksheet for Sharko Co. consisted of...

Question 13

A company receives interest on a $70,000, 8%, 5-year note receivable each April 1. At December 31, 2014, the following adjusting entry was made to accrue interest receivable:

Interest Receivable 4,200
Interest Revenue 4,200
Assuming that the company does not use reversing entries, what entry should be made on April 1, 2015 when the annual interest payment is received?

Accepted Answer

The answer of A company receives interest on a $70,000,...

Question 14

Brown Company's account balances at December 31, 2014 for Accounts Receivable and the related Allowance for Doubtful Accounts are $920,000 debit and $1,400 credit, respectively. From an aging of accounts receivable, it is estimated that $23,000 of the December 31 receivables will be uncollectible. The necessary adjusting entry would include a credit to the allowance account for

Accepted Answer

The allowance account needs to be adjusted to reflect the estimated uncollectible amount of $23,000. The current balance is $1,400 credit, so an additional $21,600 credit is needed to reach the $23,000 estimate.

Question 15

Panda Corporation paid cash of $60,000 on June 1, 2014 for one year's rent in advance and recorded the transaction with a debit to Prepaid Rent. The December 31, 2014 adjusting entry is

Accepted Answer

The correct adjusting entry is to recognize the rent expense incurred from June 1, 2014, to December 31, 2014, which is 7 months. The total prepaid rent is $60,000 for 12 months, so the monthly rent is $60,000 / 12 = $5,000. For 7 months, the rent expense is $5,000 * 7 = $35,000. Therefore, debit Rent Expense and credit Prepaid Rent for $35,000 to reflect the expense incurred during this period.

Question 16

Adjusting entries that should be reversed include those for prepaid or unearned items that

Accepted Answer

Adjusting entries that should be reversed include those for prepaid or unearned items that create an asset or a liability account and were originally entered in a revenue or expense account.

Question 17

Adjusting entries that should be reversed include

Accepted Answer

All of the options listed should be reversed because they involve adjustments made at the end of an accounting period, which must be reversed at the start of the next period. This ensures that the financial statements reflect the correct balances for assets, liabilities, revenues, and expenses.

Question 18

A company receives interest on a $70,000, 8%, 5-year note receivable each April 1. At December 31, 2014, the following adjusting entry was made to accrue interest receivable:
Interest Receivable 4,200
Interest Revenue 4,200
Assuming that the company does use reversing entries, what entry should be made on April 1, 2015 when the annual interest payment is received?

Accepted Answer

The answer of A company receives interest on a $70,000,...

Question 19

Reversing entries are
1. normally prepared for prepaid, accrued, and estimated items.
2. necessary to achieve a proper matching of revenue and expense.
3. useful in simplifying the recording of transactions in the next accounting period.

Accepted Answer

Reversing entries are primarily used to simplify the recording of transactions in the next accounting period, especially for accrued expenses and revenues. They are not normally prepared for prepaid items, and while they help in simplifying accounting processes, they are not strictly necessary to achieve proper matching of revenue and expense, which is more directly addressed through adjusting entries.

Question 20

Pappy Corporation received cash of $24,000 on September 1, 2014 for one year's rent in advance and recorded the transaction with a credit to Unearned Rent Revenue. The December 31, 2014 adjusting entry is

Accepted Answer

The adjusting entry required on December 31, 2014, is to recognize the portion of the rent that has been earned as of this date (the four months from September 1 to December 31). This means that $6,000 (4/12 of the total rent received) has been earned and should be recognized as Rent Revenue. Therefore, the adjusting entry should increase Rent Revenue by $6,000 and decrease Unearned Rent Revenue by $6,000, resulting in a debit to Unearned Rent Revenue and a credit to Rent Revenue for $6,000 each. This entry is represented by choice C.

Quiz 3: The Accounting Information System

The income statement of Dolan Corporation for 2014 included the following items: The following balances have been excerpted from Dolan Corporation's balance sheets: The cash received for interest during 2014 was