Question

Which of the following happens as a result of selling $130 of merchandise to a customer for $200 cash in a state where the sales tax rate is 4%?

a.All of these answer choices are correct.

b.Total assets increase by $78.

c.Stockholder’s equity increases by $70

d. The cash flow from operating activitiesincreases by $208.

19)Which of the following is a true statement about a company that uses the allowance method?

a.The net realizable value of its accounts receivable is shown on the balance sheet.

bUncollectible Accounts Expense is recorded when a receivable is written off

c.Uncollectible accounts are not recorded until the amount becomes significant.

d. None of these answer choices are correct.

22) Which of the following best describes the percent of receivables method?

a. Credit sales approach

b. Income statement approach

c. Direct write-off approach

d. Balance sheet approach

23) A company uses the effective interest method to amortize a bond discount. Which of the following statements is true regarding the interest expense that is recognized each year?

a. It will be greater than the interest payment and it will also increase from year to year.

b.It will remain the same from year to year.

c.It will increase from year to year.

d It will be greater than the interest payment.

24) How will an impairment loss of $15,000 relating to goodwill affect the elements of the financial statements?

a.Retained earnings decreases

b.All of these answer choices are correct.

c. Goodwill decreases

d. Impairment loss increases

30) Which of the following would not be presented in the financing section of the statement of cash flows?

a.Repayment of long-term bonds payable

b.Purchased treasury stock

c.Purchased a new office building by issuing a note payable

d. Issuing of preferred stock

37) Which of the following is a cost of extending credit to customers?

a.Fees paid to credit card companies

b.Lost sales

c.Explicit interest

d. Uncollectible accounts expense

38) Which of the following is (are) the term(s) used to describe the person responsible for making payment on the due date of a promissory note

a.Borrower or maker or debtor

b.Borrower

c.Lender or maker

d. Maker or debtor

51) Which of the following transactions would be disclosed on a schedule of noncash investing and financing activities?

a.The issuance of bonds for cash

b.Recording depreciation expense

c.A building acquired by issuing mortgage note

d.All of these answer choices are correct

55) What does the accounts receivable turnover ratio measure?

a.Average balance of accounts receivables

b.How quickly inventory turns into accounts receivable

c. How quickly the accounts receivable balance increases

d.How quickly accounts receivable turn into cash

Answer 1

Q 1	Option a	All of these answer choices are correct
	Cash	208			Asset	Increase
	Sales		200		Equity	Increase
	Sales tax payable		8	=200*4%	Liability	Increase
	Cost of goods sold	130			Equity	Decrease
	Inventory		130		Asset	Decrease
	Total assets	78	Increase	=208-130	Cash & Inventory
	Stockholder’s equity	70	Increase	=200-130	Sales & Cost of goods sold
	Cash flow from operating	208	Increase		Cash
Q 19	Option a	The net realizable value of its accounts receivable is shown on the balance sheet
	Option b is Direct write off method not allowance method
	Option c of not recording is not an option
Q 22	Option d	Balance sheet approach
Q 23	Option a	It will be greater than the interest payment and it will also increase from year to year
	Initial entry
	Cash	1,000
	Discount on bond payable	100
	Bonds Payable		1,100
	Interest payment
	Interest expense	110		greater than cash interest payment
	Discount on bond payable		10	amortised
	Cash		100
	Bonds Table				Calculation
	Interest Payment	Interest exp	Disc amortized	Carrying Amt	Interest exp	Carrying Amt
	10%	11%
				1,000
	100	110	10	1,010	=1,000*11%	=1,000+10
	100	111	11	1,021	=1,010*11%	=1,010+11
Calc	=1,000*10%	Increasing	Interest payment less Interest exp
Q 24	Option b	All of these answer choices are correct
	Impairment loss	15,000		Retained earnings decreases & Impairment loss increases
	Goodwill		15,000	Goodwill decreases
Q 30	Option c	Purchased a new office building by issuing a note payable
	Since its noncash activity
Q 37	Option d	Uncollectible accounts expense
Q 38	Option a	Borrower or maker or debtor
Q 51	Option c	A building acquired by issuing mortgage note
	The issuance of bonds for cash - Financing cash
	Recording depreciation expense - Added to Operating cash indirect method
Q 55	Option d	How quickly accounts receivable turn into cash