Accounting 200 Final Exam (Ch. 7 - 14)
questions and answers 2025/2026 latest
update
1.On November 1, Year 1 Cove Company borrowed $7,000 cash to from Shelter Company. The one-year
note carried a 7% rate of interest. Which of the following shows how the loan will affect Cove's financial
statements on November 1, Year 1? - answerBalance Sheet:
Assets = Liabilities + Equity
7000 = 7000 + NA
________________________________________________________________
Income Statement:
Revenue − Expense = Net Income
NA -NA = NA
_________________________________________________________________
Statement of Cash Flows:
7,000 FA
2.Accrued interest expense will appear on the income statement but not on the statement of cash flows.
This statement is... (true or false?) - answerTrue
3.Clayton Company borrowed $6,000 from the State Bank on April 1, Year 1. The one-year note carried a
6% rate of interest. The amount of interest expense that Clayton would report in Year 1 and Year 2,
respectively would be... - answer$270, and $90.
4.On August 1, Year 1 Gomez Company borrowed $48,000 cash. The one-year note carried a 5% rate of
interest. Which of the following shows how the December 31, Year 1 recognition of accrued interest will
effect Gomez's financial statements? - answerBalance Sheet:
Assets = Liabilities + Equity
NA = 1,000 + (1,000)
________________________________________________________________
Income Statement:
Revenue − Expense = Net Income
,NA - 1,000 = (1,000)
_________________________________________________________________
Statement of Cash Flows:
NA
5.On August 1, Year 1 Gomez Company borrowed $48,000 cash. The one-year note carried a 5% rate of
interest. Which of the following shows how the accrual of interest expense in Year 2 will effect Gomez's
financial statements? - answerBalance Sheet:
Assets = Liabilities + Equity
NA = 1,400 + (1,400)
________________________________________________________________
Income Statement:
Revenue − Expense = Net Income
NA - 1,400 = (1,400)
_________________________________________________________________
Statement of Cash Flows:
NA
Forest Beach Company experienced an event that had the following effects on its financial statements:
Balance Sheet:
Assets = Liabilities + Equity
(-) = (-) + (NA)
________________________________________________________________
Income Statement:
Revenue − Expense = Net Income
(NA) - (NA) = (NA)
_________________________________________________________________
Statement of Cash Flows:
,(-FA)
Which of the following events could have caused these effects? - answerPaid cash to settle the principal
balance of note payable.
Jefferson Company borrowed $6,000 on April 1, Year 1. The one-year note carried a 6% rate of interest.
The amount of cash outflow from operating activities that Jefferson would report in Year 1 and Year 2,
respectively would be... - answer$0, and $360.
On September 1, Year 1 Western Company borrowed $36,000 cash. The one-year note carried a 5% rate
of interest. The amount of interest expense on the income statement and the amount of cash flow from
operating activities shown on Western's December 31, Year 1 financial statements would be... -
answer$600 interest expense and zero cash outflow from operating activities.
Warranty obligations are contingent liabilities that must be recognized and reported in a company's
published financial statements. This statement is... (true or false?) - answerTrue.
The adjusting entry required to recognize warranty expense will cause... - answerliabilities to increase
and equity to decrease.
The adjusting entry required to recognize warranty expense will cause... - answerequity to decrease and
will not affect cash flow from operating activities.
Explorer Supplies, Inc. had sales of $120,000 in Year 1. Explorer warrants its products and estimates
warranty expense to be 3% of sales. Which of the following shows how the year end adjusting entry
would affect the company's assets, liabilities, and stockholders' equity? - answerTotal Assets: NA
Liabilities: +3600
Stockholders Equity: (3600)
,Taylor Tools, Inc. has sales of $200,000 in Year 1. Taylor warrants its products and estimates warranty
expense to be 4% of sales. Which of the following shows how the year end adjusting entry would affect
the company's assets, liabilities, and cash flow from operating activities? - answerTotal Assets: NA
Liabilities: +8000
Stockholders Equity: NA
Which of the following shows how paying off a warranty obligation will affect a company's financial
statements? - answerBalance Sheet:
Assets = Liabilities + Equity
(-) = (-) + (NA)
________________________________________________________________
Income Statement:
Revenue − Expense = Net Income
(NA) - (NA) = (NA)
_________________________________________________________________
Statement of Cash Flows:
(-OA)
Tom Tom Toys, Inc. has sales of $500,000 in Year 1. Tom Tom warrants its products and estimates
warranty expense to be 2% of sales. Which of the following shows how the year end adjusting entry for
warranty expense would affect the company's financial statements? - answerBalance Sheet:
Assets = Liabilities + Equity
NA = $10,000 + ($10,000)
________________________________________________________________
Income Statement:
Revenue − Expense = Net Income
NA - $10,000 = ($10,000)
_________________________________________________________________
, Statement of Cash Flows:
NA
If investors require more interest than the rate of interest stated in a bond, the bond must be sold at a
discount in order to motivate the investor to purchase the bond. This statement is... (true of false?) -
answerTrue.
On January 1, Year 1 Residence Company issued bonds with a $50,000 face value. The bonds were
issued at 96 resulting in a 4% discount. They had a 20 year term and a stated rate of interest of 7%.
Based on this information, the carrying value of the bond liability on January 1, Year 1 is... -
answer$48,000
Explanation:
The carrying value of the bond liability is the face value of the bonds minus the discount. In this case, the
carrying value is $48,000 [($50,000 - ($50,000 × 0.04)]. The carrying value can also be determined by
multiplying the face value of the bond times the bond price. The bond price is normally expressed as a
percentage of face value. For example a bond priced at 96 means that the bonds will sell for 96% of face
value. To confirm, $50,000 × 0.96 = $48,000
On January 1, Year 1 Residence Company issued bonds with a $50,000 face value. The bonds were
issued at 96 resulting in a 4% discount. They had a 20 year term and a stated rate of interest of
7%.Which of the following shows how the bond issue will affect Residence's financial statements on
January 1, Year 1? - answerBalance Sheet:
Assets = Liabilities + Equity
$48,000 = $48,000 + NA
________________________________________________________________
Income Statement:
Revenue − Expense = Net Income
NA - NA = NA
_________________________________________________________________
Statement of Cash Flows:
$48,000 FA
questions and answers 2025/2026 latest
update
1.On November 1, Year 1 Cove Company borrowed $7,000 cash to from Shelter Company. The one-year
note carried a 7% rate of interest. Which of the following shows how the loan will affect Cove's financial
statements on November 1, Year 1? - answerBalance Sheet:
Assets = Liabilities + Equity
7000 = 7000 + NA
________________________________________________________________
Income Statement:
Revenue − Expense = Net Income
NA -NA = NA
_________________________________________________________________
Statement of Cash Flows:
7,000 FA
2.Accrued interest expense will appear on the income statement but not on the statement of cash flows.
This statement is... (true or false?) - answerTrue
3.Clayton Company borrowed $6,000 from the State Bank on April 1, Year 1. The one-year note carried a
6% rate of interest. The amount of interest expense that Clayton would report in Year 1 and Year 2,
respectively would be... - answer$270, and $90.
4.On August 1, Year 1 Gomez Company borrowed $48,000 cash. The one-year note carried a 5% rate of
interest. Which of the following shows how the December 31, Year 1 recognition of accrued interest will
effect Gomez's financial statements? - answerBalance Sheet:
Assets = Liabilities + Equity
NA = 1,000 + (1,000)
________________________________________________________________
Income Statement:
Revenue − Expense = Net Income
,NA - 1,000 = (1,000)
_________________________________________________________________
Statement of Cash Flows:
NA
5.On August 1, Year 1 Gomez Company borrowed $48,000 cash. The one-year note carried a 5% rate of
interest. Which of the following shows how the accrual of interest expense in Year 2 will effect Gomez's
financial statements? - answerBalance Sheet:
Assets = Liabilities + Equity
NA = 1,400 + (1,400)
________________________________________________________________
Income Statement:
Revenue − Expense = Net Income
NA - 1,400 = (1,400)
_________________________________________________________________
Statement of Cash Flows:
NA
Forest Beach Company experienced an event that had the following effects on its financial statements:
Balance Sheet:
Assets = Liabilities + Equity
(-) = (-) + (NA)
________________________________________________________________
Income Statement:
Revenue − Expense = Net Income
(NA) - (NA) = (NA)
_________________________________________________________________
Statement of Cash Flows:
,(-FA)
Which of the following events could have caused these effects? - answerPaid cash to settle the principal
balance of note payable.
Jefferson Company borrowed $6,000 on April 1, Year 1. The one-year note carried a 6% rate of interest.
The amount of cash outflow from operating activities that Jefferson would report in Year 1 and Year 2,
respectively would be... - answer$0, and $360.
On September 1, Year 1 Western Company borrowed $36,000 cash. The one-year note carried a 5% rate
of interest. The amount of interest expense on the income statement and the amount of cash flow from
operating activities shown on Western's December 31, Year 1 financial statements would be... -
answer$600 interest expense and zero cash outflow from operating activities.
Warranty obligations are contingent liabilities that must be recognized and reported in a company's
published financial statements. This statement is... (true or false?) - answerTrue.
The adjusting entry required to recognize warranty expense will cause... - answerliabilities to increase
and equity to decrease.
The adjusting entry required to recognize warranty expense will cause... - answerequity to decrease and
will not affect cash flow from operating activities.
Explorer Supplies, Inc. had sales of $120,000 in Year 1. Explorer warrants its products and estimates
warranty expense to be 3% of sales. Which of the following shows how the year end adjusting entry
would affect the company's assets, liabilities, and stockholders' equity? - answerTotal Assets: NA
Liabilities: +3600
Stockholders Equity: (3600)
,Taylor Tools, Inc. has sales of $200,000 in Year 1. Taylor warrants its products and estimates warranty
expense to be 4% of sales. Which of the following shows how the year end adjusting entry would affect
the company's assets, liabilities, and cash flow from operating activities? - answerTotal Assets: NA
Liabilities: +8000
Stockholders Equity: NA
Which of the following shows how paying off a warranty obligation will affect a company's financial
statements? - answerBalance Sheet:
Assets = Liabilities + Equity
(-) = (-) + (NA)
________________________________________________________________
Income Statement:
Revenue − Expense = Net Income
(NA) - (NA) = (NA)
_________________________________________________________________
Statement of Cash Flows:
(-OA)
Tom Tom Toys, Inc. has sales of $500,000 in Year 1. Tom Tom warrants its products and estimates
warranty expense to be 2% of sales. Which of the following shows how the year end adjusting entry for
warranty expense would affect the company's financial statements? - answerBalance Sheet:
Assets = Liabilities + Equity
NA = $10,000 + ($10,000)
________________________________________________________________
Income Statement:
Revenue − Expense = Net Income
NA - $10,000 = ($10,000)
_________________________________________________________________
, Statement of Cash Flows:
NA
If investors require more interest than the rate of interest stated in a bond, the bond must be sold at a
discount in order to motivate the investor to purchase the bond. This statement is... (true of false?) -
answerTrue.
On January 1, Year 1 Residence Company issued bonds with a $50,000 face value. The bonds were
issued at 96 resulting in a 4% discount. They had a 20 year term and a stated rate of interest of 7%.
Based on this information, the carrying value of the bond liability on January 1, Year 1 is... -
answer$48,000
Explanation:
The carrying value of the bond liability is the face value of the bonds minus the discount. In this case, the
carrying value is $48,000 [($50,000 - ($50,000 × 0.04)]. The carrying value can also be determined by
multiplying the face value of the bond times the bond price. The bond price is normally expressed as a
percentage of face value. For example a bond priced at 96 means that the bonds will sell for 96% of face
value. To confirm, $50,000 × 0.96 = $48,000
On January 1, Year 1 Residence Company issued bonds with a $50,000 face value. The bonds were
issued at 96 resulting in a 4% discount. They had a 20 year term and a stated rate of interest of
7%.Which of the following shows how the bond issue will affect Residence's financial statements on
January 1, Year 1? - answerBalance Sheet:
Assets = Liabilities + Equity
$48,000 = $48,000 + NA
________________________________________________________________
Income Statement:
Revenue − Expense = Net Income
NA - NA = NA
_________________________________________________________________
Statement of Cash Flows:
$48,000 FA
