Question

31. Katelyn Corporation mistakenly forgot to record depreciation on its computer equipment at the end of it fiscal year. As a result:

A. Assets would be overstated and Retained Earnings would be understated

B. Assets and Retained earnings would be understated

C. Assets and Retained Earnings would be overstated

D. Assets would be understated and Retained Earnings would be overstated

32. Luke Enterprises has 2019 credit sales of $600,000. The balance in the Allowance for Doubtful Accounts is $10,000 (normal balance). Luke estimates that 4% of credit sales will be uncollectible. What would Luke record as the adjusting journal entry at the end of their 2019 fiscal year?

A. Debit Bad Debt Expense $14,000; Credit Allowance for Doubtful Accounts $14,000

B. Debit Bad Debt Expense $14,000; Credit Accounts Receivable $14,000

C. Debit Bad Debt Expense $24,000; Credit Allowance for Doubtful Accounts $24,000

D. Debit Bad Debt Expense $24,000; Credit Accounts Receivable $24,000

33. At January 1, 2019, the Leia Company, a manufacturer of gourmet pet food, had assets of $300,000 and liabilities of $120,000. During 2019, Leia made sales of $140,000 (half for cash and half on account), incurred and paid payroll for employees of $65,000, incurred and paid rent of $18,000 and paid for insurance for 2020 of $11,000. The total stockholders’ equity balance for Leia at December 31, 2019 is:

A. $57,000

B. $156,000

C. $226,000

D. $237,000

34. Petey Company (“Petey”) sells personalized hockey sticks to college hockey teams. Petey had the following transactions occur during the month of April 2019: Sold hockey sticks on account to Bentley University for $20,000; Sold hockey sticks for cash to UNH for $30,000; Incurred and paid travel costs for sales promotion of hockey stick sales of $8,000; Borrowed $4,000 from a bank; Incurred and paid April 2019 payroll for $12,000 and Incurred rent expense of $5,000. What was Petey’s net income for April 2019?

A. $5,000

B. $21,000

C. $25,000

D. $30,000

35. At the end of the fiscal year, Ally, the accountant for Falcon Corporation, forgot to make an adjusting journal entry to the prepaid rent account to record rent expense that was incurred during the year. Which of the following statements would be correct about this situation?

A. Expenses would be overstated

B. Retained earnings would be overstated

C. Assets will be understated

D. None of the above

36. Whatley’s Dental Supplies’ largest customer is experiencing cash flow problems and Whatley is concerned that the customer will not pay its currently due invoices for at least 90 days. If the customer does not pay Whatley on a timely basis, which of the following will be true about Whatley’s financial ratios for the current month?

A. Whatley’s current ratio will rise

B. Whatley’s quick ratio will fall

C. Whatley’s average payment period will increase

D. Whatley’s accounts receivable turnover will decrease

37. For the year ended December 31, 2019, Weaver’s Comedy Store reported that its gross profit margin, operating profit margin and profit margin were 72%, 35% and 11% respectively. Weaver reported sales of $200,000 for the year. What were Weaver’s selling and administrative expenses for the year? Assume that all of Weaver’s operating expenses were comprised of selling and administrative expenses.

A. $70,000

B. $22,000

C. $56,000

D. $74,000

38. On May 31, 2019, Teri Corporation sold spring floral arrangements for $27,000 (on account). Teri paid $12,000 to acquire the flowers from a wholesaler. Which of the entries will be made on May 31, 2019?

A. Debit Cost of Goods Sold $12,000; Credit Inventory $12,000

B. Debit Cash $27,000; Credit Sales Revenue $27,000

C. Debit Accounts Receivable $27,000; Credit Unearned Revenue $27,000

D. Debit Cost of Goods Sold $12,000; Credit Revenue $27,000

39. Manny Corporation (“Manny”) has the following information from its financial statements and is trying to assess its business. What are the Days Sales in Inventory (“DSI”), Accounts Receivable Turnover (“ART”) and Accounts Payable Turnover (“APT”) ratios?

Revenue $450,000

Cost of Goods Sold $300,000

Operating Expenses $20,000

Cash $40,000

Accounts Receivable $90,000

Inventory $50,000

Accounts Payable $50,000

A. DSI = 0.17; ART = 6.0; APT = 5.0

B. DSI = 60.83; ART = 5.0; APT = 6.0

C. DSI = 60.83; ART = 9.0; APT 3.33

D. DSI = 6.083; ART = 9.0; APT = 6.0

40. The following are selected data from Braun Corporation’s year-end financial statements. What is the gross profit margin for Braun Corp.?

Net Income $300,000

Sales $900,000

Cost of Goods Sold $400,000

Operating Income $325,000

Total Liabilities $200,000

A. 33.33%

B. 28.33%

C. 36.11%

D. 55.56%

Answer 1