Posted: June 13th, 2022

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38. The accountant at Abco, Inc. made an adjusting entry at the end of February to accrue interest on a note receivable from a customer. The effect of this entry is to: 
A. Decrease ROI for February.
B. Increase ROI for February.
C. Decrease working capital at February 28.
D. Decrease the acid-test ratio at February 28.

 

39. The accounting concept/principle being applied when an adjustment is made is usually: 
A. matching revenue and expense.
B. consistency.
C. original cost.
D. materiality.

 

40. The Interest Receivable account for February showed transactions totaling $8,500 and an adjustment of $11,200.All of the following responses are correct except: 
A. The transactions probably resulted from accruing interest income earned.
B. The transactions were probably entered on the credit side of the account.
C. The adjustment was probably for cash receipts of interest receivable accrued in prior months.
D. The balance in the interest receivable account decreased $2,700.

 

41. The balance in the Accrued Wages Payable account increased from $12,200 at the beginning of the month to $15,000 at the end of the month. Wages accrued during the month totaled $61,000. 
A. Wages paid during the month totaled $58,200.
B. Wages paid during the month totaled $64,800.
C. Wages expense for the month totaled $58,200.
D. Wages expense for the month totaled $76,000.

 

42. Bad debt expense is recognized in the same accounting period as the revenue that is related to the receivable because: 
A. the accounts receivable asset should be stated at original cost.
B. the exact amount of the losses from bad debts is known.
C. revenues should be stated at realizable value.
D. all costs incurred in the current period should be subtracted from current period revenues.

 

43. When an uncollectible account receivable is written off against the allowance for bad debts: 
A. total current assets decrease and expenses increase.
B. total current assets are not affected.
C. total current assets decrease and expenses decrease.
D. current assets decrease and expenses are not affected.

 

44. With respect to the write-off of an uncollectible account receivable against the allowance for bad debts, a sound system of internal control would require: 
A. the write-off be approved by two employees.
B. an investigation of why credit was extended to this customer in the first place.
C. a lawsuit to be initiated to recover the uncollectible amount.
D. the write-off to be made within six months after the date of sale.

 
 

45. An organization’s system of internal control is designed primarily to: 
A. ensure that no employees steal the organization’s property.
B. increase efficiency by letting one employee handle all aspects of a transaction from beginning to end.
C. ensure that the organization’s balance sheet will always balance.
D. provide an operating framework for all employees as they work to achieve the organization’s goals.

 

46. If an organization purchases $700 of supplies on account, with terms of 2/15, n50: 
A. $650 must be paid within 15 days of the invoice date.
B. $698 must be paid within 50 days of the invoice date.
C. $686 can be paid within 15 days of the invoice date, or $700 must be paid within 50 days of the invoice date.
D. $686 can be paid within 15 days of the invoice date, or $714 must be paid within 50 days of the invoice date.

 

47. Trading and Available-for-Sale securities are reported on the balance sheet at: 
A. Net realizable value.
B. Historical cost.
C. Weighted average cost.
D. Market value.

 

48. Which of the following is (are) a category for securities? 
A. Trading.
B. Held-to-maturity.
C. Available-for-sale.
D. All of the above.

 

49. When a firm uses the LIFO inventory cost flow assumption: 
A. cost of goods sold will be greater than if FIFO were used.
B. net income will be greater than if FIFO were used.
C. cost of goods sold will be the same as if FIFO were used.
D. better matching of revenue and expense is achieved than under FIFO.

 

50. Accounts receivable are reported at: 
A. Net realizable value.
B. Historical cost.
C. Weighted average cost.
D. Market value.

 
 

Essay

1. At the beginning of the current fiscal year, Surrey Corp.’s balance sheet showed assets of $675,000 and Liabilities of $525,000. During the year, liabilities decreased by $35,000. Net Income for the year was $175,000, and net assets at the end of the year were $193,000. There were no changes in paid-in capital during the year.

Calculate the dividends, if any, declared during the year.
Calculate the total assets at the end of the year.  

 2. From the data given below, calculate the Retained Earnings balance of December 31, 2010.
  
Prepare the retained earning portion of a statement of change in owners’ equity for the year ended December 31, 2010.   

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