ACTG Practice Exam | 100% Correct Answers | Verified | Latest 2024 Version

A company uses the Allowance method of accounting for Bad Debts. This means that in the period when an Account Receivable actually becomes uncollectible, the company will reduce Accounts Receivable and: - Decrease the Allowance for Doubtful Accounts account (This is a "write-off". The journal entry is a debit to Allowance for Doubtful Accounts and credit to Accounts Receivable.) The concept of "accrual" accounting - Recognizes revenues when they are earned, and expenses when they are incurred. The beginning balance in Accounts Receivable was $5,000. Sales on account amounted to $20,000 and sales for cash amounted to $18,000. During the period, $7,000 of Accounts Receivable was written off. If the ending balance in accounts receivable was $1,200, the amount of cash collected from customers is: - 16,800 (When sales revenue occurs and cash is immediately collected, you increase (debit) Cash and increase (credit) Revenue. Therefore, the $18,000 is not included as an increase (debit) in A/R. The $7,000 write-off decreases A/R.) Our customer pays us in advance $500 for services which our company is to provide in a future period. This event: - Increases Assets and increases Liabilities Which of the following accounts are NOT found in the "Closing Entry - contributed capital As a piece of equipment or property loses its value due to usage or the mere passage of time, the company records an entry which: - Credits Accumulated Depreciation If we provide cash to our vendor in a period before the expense is actually incurred & recorded, the expense is known as: - deferral or deferred expense ABC Company purchases 150 units of inventory at $400 each, under terms of FOB Shipping Point, 2-10- Net 30. They pay $6 per unit transportation costs on inbound freight with cash. They pay the vendor's invoice early, taking the early-payment cash discount. This means that one unit of inventory now has a total acquisition cost of: - 398 (Set up an inventory T-account to help you solve this problem. Update the T-account after each event takes place, starting with buying the inventory on account for $60,000 (= 150 units * $400). The journal entry is a debit to Inventory and credit to Accounts Payable.Next, record the cash payment of the freight expense of $900 (= 150 units * $6) as a debit to Inventory and credit to Cash. The Inventory account increases because it was sold FOB Shipping Point. Because we paid within the discount period, we reduce our inventory account by $1,200 (= $60,000 * .02). This leaves us with an ending Inventory balance of $59,700 (= 60,000 + 900 - 1,200). In order to get the acquisition cost of the inventory on a per unit basis, we must divide $59,700 by the total number of units we bought (150) to get $398 per unit.) P&G, Inc., started operations on June 1, 2017 with a $100,000 cash contribution from its owner. During 2017, the company earned $80,000 in revenue, and incurred $180,000 in Expenses. No other activity happened during 2017. During 2018, the company earned $210,000 in revenue, and incurred $180,000 in Expenses. A distribution of $5,000 was made to owners during December 2018. What was P&G's Total Equity as reported on their balance sheet as of December 31, 2018? - 140,000 (Beginning Balances for 2018: Contributed Capital $100,000 Retained Earnings $15,000 No change in Contributed Capital, so that stays at $100,000. Retained Earnings increases by $25,000 (= 210,000 - 180,000 - 5,000). Therefore, Total Equity as of December 31, 2018 is $140,000 (= 100,000 + 15,000 + 25,000).) All of the following appear as line items on the Balance Sheet except: - revenues (On the Statements of Changes in Owner's Equity: Net Income (Rev - Exp) is added to the beginning balance of Retained Earnings and Dividends are subtracted from the beginning balance of Retained Earnings to obtain the ending balance of Retained Earnings, which is displayed as a line item on the Balance Sheet) One of the primary functions of the independent financial auditor is to check for and discover any fraud in the business. - False (Independent financial auditors are not obligated to try and go out of their way to find fraud in a business.) Which of the three forms of business ownership almost always displays a separation of "ownership" from "operations"? - corporation Dukes Corporation's Balance Sheet as of December 31, 2019, showed Total Assets of $600,000, Liabilities of $230,000, Contributed Capital of $80,000. What was Dukes's Retained Earnings balance? - 290,000Baltimore Company began 2019 with a debit balance of $15,000 in Accounts Receivable. During the period, the company recorded $200,000 of sales on account, and at the end of the year, Accounts Receivable showed a debit balance of $25,000. Based on this information, how much cash did Baltimore Company collect from Accounts Receivable? - 190,000 (Make an Accounts Receivable T-chart to help you in solving this problem. Start with a debit balance of $15,000 and then add a debit of $200,000 from sales on account . Right now the total balance in A/R is $215,000. If we are given that our ending A/R balance is $25,000, then we must have collected $190,000 as cash from A/R during the year. The journal entry for the cash collection: Debit Cash $190,000 and Credit A/R $190,000) An event occurred that caused the company to debit Cash for $10,000 and credit Unearned Revenue for $10,000. Which of the following events most likely happened to cause this entry? - The company collected cash from a customer in advance and will perform services in the future. (The company is liable to perform services for the customer at a future date because they collected cash in advance.) After making all adjusting entries, the Adjusted Trial Balance of ABC Company shows total Contributed Capital of $450,000, total Revenue of $1,000,000, total expenses of $750,000, and total distributions to owners. of $20,000. What amount will be debited to Retained Earnings during the closing entry? - 770,00 in a double entry accounting system, - the accounting equation must balance after every transaction. A business event occurred that caused the company to record a journal entry increasing each side of the accounting equation. Which of the following events most likely occurred? -