Exam 15: Fundamentals of Accounting

Alberta's Appliances is a wholesaler that sells to retail stores on credit.Alberta's sales for the year were $250,000.During the year,it received payments of $220,000 from customers.At year-end,it establishes an allowance for uncollectible accounts equal to 5% of the unpaid receivables.How much should Alberta's report as net accounts receivable at December 31?

Herman Appliance buys and sells refrigerators.Herman starts the year with an inventory of $20,000.During the year,Herman buys refrigerators totaling $182,000.At year-end,Herman takes inventory and finds that he has $28,000 of refrigerators on hand.During the year,Herman's sales revenue was $256,000.What was Herman's gross profit on the sales for the year?

After you have closed an entity's books,what happens to the account balances?

A hospital's accounting year ends on June 30.Which of the following events requires the hospital to record an expense accrual at June 30?

A business keeps its accounts on a calendar-year basis.On January 1,2013,there is a balance of $2,800 in the Prepaid insurance account.The insurance represented by that amount expires on March 31,2013,but the business makes no entry to record the expiration of the insurance until its year-end.On April 1,2013,the business pays $16,000 for an insurance policy covering the period April 1,2013 - March 31,2014.Prepare the journal entry at December 31,2013,to record the full amount of insurance expense for the year.

An owner of a business withdraws cash from his business.Which of the following accounts would need to be reduced to record this transaction?

Angel's Appliances buys four washing machines for its inventory at a price of $400 each.It makes the purchase on credit.It then sells three of the machines for cash at $550 each.Make journal entries to record these transactions.Then state how much gross profit Angel made.

Suzy Queue hires a salesperson for her business.Suzy agrees to pay the salesperson a commission of 10 percent of sales.By the end of the first month,the salesperson has done $50,000 of sales.Suzy wants to prepare accurate financial statements at the end of the month,but has not yet paid the salesperson.What journal entry should she make before preparing her financial statements for the month?

Robert Plant invests $50,000 of his own money in a business.What journal entry should be made to record Robert's investment in the business?

These transactions relate to Rudy's Garage,an auto repair shop.Which two of the following six possibilities occurred as a result of each transaction - an asset increased,an asset decreased,a liability increased,a liability decreased,equity increased,or equity decreased: a.Rudy bought 5 batteries on credit.He put the batteries in inventory b.Rudy did a repair job for a customer,who paid in cash c.In doing the repair job,Rudy used one of the batteries he had bought in transaction a

In August,2013,a publisher receives a check for $120 from a subscriber for a one-year subscription to "Willie," a monthly magazine.The subscriber will receive the first magazine in September.Prepare: (a)the journal entry to record the amount received in August;and (b)the adjusting entry to be made as of December 31,2013.(HINT: The publisher earns revenue only on delivery of magazines to the subscribers.Receipt of cash before delivery results in a liability called "Deferred subscription revenue.")

Elsie owns a small business.At the end of the month,Elsie needed to make adjusting entries to prepare statements on the accrual basis.Which two of the following six possibilities occurred as a result of each of the following adjustments - an asset increased,an asset decreased,a liability increased,a liability decreased,equity increased,or equity decreased: a.An accrual for salaries that were due to an employee,but were not paid b.An adjustment for depreciation on Elsie's store fixtures c.An adjustment for the expiration of prepaid insurance d.An accrual for interest earned on a certificate of deposit that had not matured

Alberta's Appliances is a wholesaler that sells to retail stores on credit.To provide for possible bad debts,Alberta established a $32,000 allowance for uncollectible accounts.One of its customers goes bankrupt and Alberta decided to write off the account as uncollectible.What journal entry should Alberta make to record the bankruptcy?

Glen Turner purchases a high-speed copying machine on credit for his printing business.The machine is expected to have a useful life of four years.What journal entry should be made at the time the copying equipment is received?

Which of the following accounts is increased with debits?

Why would the accrual basis of accounting be preferable to the cash basis?

A business borrows $100,000 from a bank on July 1,2008.Under the agreement with the bank,the loan must be repaid in full on June 30,2009,with interest at 6% a year.The business wants to prepare financial statements for the year ended December 31,2008.How much interest expense should it report for that year?

Veronica Lodge borrowed $15,000 from a bank on January 1,2013 to finance her new business.She agrees to repay the bank on December 31,2013,with $750 interest on the loan.In addition to increasing cash,what else should Veronica record on January 1,2013?

Macky McClung uses accrual accounting to keep the records of her toy store.She paid $15,000 on January 1 for rent for the three months January-March.To correctly report her expenses for the month of January,what must her accounting entry accomplish?