Question

Hello, this is only multiple choice
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5.
On March 31, 2015, Cars, Inc. owes Preston Devices, one of its suppliers, $25,000 for previous purchases. During April 2015, Preston sells Cars devices with a sales price of $10,000 and a cost to Preston of $8,000. During April, Cars pays Preston $12,000 against the amount owed to Preston. What is the effect of these April transactions on Preston's balance sheet? *   
Cash increased by $12,000; accounts receivable decreased by $2,000; inventory decreased by $8,000; retained earnings increased by $2,000
 *   
Accounts receivable increased by $2,000; inventory decreased by $8,000; cash increased by $12,000; retained earnings increased by $12,000
 *   
Cash increased by $12,000; retained earnings decreased by $2,000; inventory decreased by $10,000; accounts receivable decreased by $12,000
 *   
Cash increased by $2,000; accounts receivable decreased by $2,000; inventory decreased by $8,000; retained earnings decreased by $12,000

6.
On January 1, 2015, Mansfield Company has a retained earnings balance of $256,000. During 2015, its net income is $44,000 and it announces and pays $12,000 in dividends. There is no other dividendrelated activity during the year. Its December 31, 2015, retained earnings balance is _______. *   
$212,000
 *   
$288,000
 *   
$300,000
 *   
$224,000

7.
During June 2015, Bextra Inc. recorded sales of $55,000 but only $20,000 was collected in cash from customers. Cost of goods sold was $38,000. What was the effect of these sales on Bextra's current ratio? *   
Current ratio increases
 *   
Current ratio decreases
 *   
Current ratio remains unchanged
 *   
Insufficient information provided to judge effect on current ratio

8.
When an entity recognizes revenue before it has received cash for the sale, it records an increase in a(n) _______.
*   
liability such as 'Advances from customers'
 *   
accounts payable
 *   
accounts receivable
 *   
prepaid expense

9.
Patnode recorded a 2015 tax expense of $3,000. What amount did it pay to the tax authorities during 2015?

*   
$2,400 *   
$7,000 *   
$600 *   
$5,400 * 
10.
On April 30, 2015, Zono Electronics, Inc. made a payment of $3,500 to Imperial Distributors, a supplier. Choose the statement that best describes the recording of this financial transaction by Imperial Distributors. *   
Debit cash $3,500; credit accounts payable $3,500
 *   
Debit accounts receivable $3,500; credit cash $3,500
 *   
Debit accounts payable $3,500; credit cash $3,500
 *   
Debit cash $3,500; credit accounts receivable $3,500

11.
The historical cost concept reflects the fact that financial accounting practice favors *   
reliability over relevance.
 *   
management's best guess over historical financial information.
 *   
relevance over reliability.
 *   
consensus market values over historical financial information.

12.
Annie's Fitness sells a set of free weights to a customer for which Annie's had paid $750. Which one of the following statements describes the most appropriate accounting for the transaction?
*   
Debit cost of goods sold expense $750; credit cash $750
 *   
Debit inventory $750; credit cost of goods sold expense $750
 *   
Debit cost of goods sold expense $750; credit inventory $750
 *   
Debit inventory $750; credit accounts payable $750

13.
Juan Foods makes a cash sale with a positive gross margin. Which one of the following statements describes the effect of the sale on Juan Foods? *   
Current ratio increases
 *   
Current ratio decreases
 *   
No change to Juan Foods' current ratio
 *   
Insufficient information to judge effect on current ratio

14.
Juan Foods pays off a long-term debt in full. Which one of the following statements describes the effect of the transaction on Juan Foods? *   
Current ratio increases; total debt to equity ratio decreases
 *   
Current ratio decreases; total debt to equity ratio decreases
 *   
Current ratio decreases; total debt to equity ratio increases
 *   
Current ratio increases; total debt to equity ratio increases

*
15.
To be recorded as a liability, an item must meet three specific conditions. Two of them are: it must involve probable future sacrifice of economic resources by the entity, and it must be a present obligation that arose as a result of a past transaction. Which one of the following is the third condition? *   
The item must reduce the market value of the recording entity.
 *   
It must involve a transfer of resources to another entity.
 *   
It must involve the expenditure of cash now or in the future.
 *   
It must not cause total liabilities to exceed total assets. * 16.

What is Patnode's current ratio at the end of 2014?

*   
2.46 *   
0.41 *   
1.12 *   
0.89
17.
Kirby, Inc. records a sale with a gross margin of $1,400. Which one of the following statements correctly describes the effect of such a sale on its balance sheet? *   
Common stock increases by $1,400
 *   
The sales revenue account increases by $1,400
 *   
The gross margin account increases by $1,400
 *   
The retained earnings account increases by $1,400

*
18.
This question is based on Patnode Inc.'s balance sheets at year end 2014 and 2015.

During 2015, Patnode announced and paid dividends of $1,000, the only dividend-related activity during the year. What was its 2015 net income?

*   
$5,600 *   
$3,600 *   
$4,600 *   
Cannot be estimated
19.
On December 31, 2015, Juan Foods purchases a van for $12,000. How does the purchase of the van affect Juan Foods' 2015 income statement? *   
Decreases sales by $12,000
 *   
Increases operating expenses by $12,000
 *   
No material effect

*   
Increases cost of goods sold by $12,000


Answer 1

5. Cash increased by $12,000; accounts receivable decreased by $2,000; inventory decreased by $8,000; retained earnings increased by $2,000

Accounts Receivable	Inventory	Retained Earnings	Cash
10,000.00	- 8,000.00	2,000.00
- 12,000.00			12,000.00
-   2,000.00
Decrease	Decrease	Increase	Increased

6) 256,000 + 44,000 - 12,000 = 288,000

7)Current ratio increases

8)accounts receivable

9)Incomplete information

10) Debit accounts payable $3,500; credit cash $3,500

11)reliability over relevance

12)Debit cost of goods sold expense $750; credit inventory $750

13)Current ratio increases

14)Current ratio decreases; total debt to equity ratio decreases

15)It must involve the expenditure of cash now or in the future

16) Incomplete information

17)The retained earnings account increases by $1,400

18)Incomplete information

19)No material effect