ACCS Review Exam with Accurate
Answers
On April 12, Hong Company agrees to accept a 60-day, 10%, $4,500 note from Indigo Company
to extend the due date on an overdue account. What is the journal entry that Indigo Company
would make, when it records payment of the note on the maturity date? (Use 360 days a year.)
A) Debit Notes Payable $4,500; debit Interest Expense $75; credit Cash $4,575. B) Debit Notes
Payable $4,500; credit Interest Expense $75, credit Cash $4,425. C) Debit Cash $4,575; credit
Interest Revenue $75; credit Notes Payable $4,500. D) Debit Notes Payable $4,500; debit
Interest Expense $112; credit Cash $4,612. - ✔✔A) Debit Notes Payable $4,500; debit Interest
Expense $75; credit Cash $4,575
Athena Company provides employee health insurance that costs $5,000 per month. In addition,
the company contributes an amount equal to 5% of the employees' $120,000 gross salary to a
retirement program. The entry to record the accrued benefits for the month would include a
A) Debit to Medical Insurance Payable $5,000.
B) Debit to Employee Retirement Program Payable $6,000.
C) Debit to Employee Benefits Expense $11,000.
D) Debit to Payroll Taxes Expense $11,000. - ✔✔C) Debit to Employee Benefits Expense
$11,000.
3. During June, Vixen Company sells $850,000 in merchandise that has a one year warranty.
Experience shows that warranty expenses average about 3% of the selling price. Customers
returned $14,000 of merchandise for warranty replacement during the month. The entry to
settle the customer warranties is: A) Debit Warranty Expense $14,000; credit Estimated
Warranty Liability $14,000
B) Debit Estimated Warranty Liability $14,000; credit Merchandise Inventory $14,000 C) Debit
Estimated Warranty Liability $11,500; credit Merchandise Inventory $11,500 D) Debit Estimated
Warranty Liability $25,500; credit Warranty Expense $25,500 - ✔✔B) Debit Estimated Warranty
Liability $14,000; credit Merchandise Inventory $14,000
, 4. Contingent liabilities are recorded or disclosed unless they are:
A) Probable and estimable.
B) Probable and not estimable.
C) Remote.
D) Possible and estimable. - ✔✔C) Remote.
$100,000 in 5 year bonds are issued on January 1 at par by a company with a stated rate of
interest of 6% with interest paid semi-annually on June 30 and December 31 (use 360 day year).
The journal entry on December 31 of the first year is:
A) Debit Bonds Payable $100,000; Credit Cash $100,000
B) Debit Interest Expense $3,000; Credit Interest Payable $3,000
C) Debit Interest Expense $6,000; Credit Cash $6,000
D) Debit Interest Expense $3,000; Credit Cash $3,000 - ✔✔D) Debit Interest Expense $3,000;
Credit Cash $3,000
On January 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment
note requiring annual equal payments each December 31 of $37,258. What is the journal entry
to record the second annual payment?
A) Debit Notes Payable $37,258; credit Cash $37,258.
B) Debit Interest Expense $20,000; debit Notes Payable $17,258; credit Cash $37,258. C) Debit
Interest Expense $37,258; credit Cash $37,258.
D) Debit Interest Expense $18,619; debit Notes Payable $18,639; credit Cash $37,258 - ✔✔B)
Debit Interest Expense $20,000; debit Notes Payable $17,258; credit Cash $37,258
On January 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment
note requiring annual equal payments each December 31 of $37,258. What is the balance in the
Installment Note account after the second annual payment?
A) $250,000
B) $214,103
C) $0
Answers
On April 12, Hong Company agrees to accept a 60-day, 10%, $4,500 note from Indigo Company
to extend the due date on an overdue account. What is the journal entry that Indigo Company
would make, when it records payment of the note on the maturity date? (Use 360 days a year.)
A) Debit Notes Payable $4,500; debit Interest Expense $75; credit Cash $4,575. B) Debit Notes
Payable $4,500; credit Interest Expense $75, credit Cash $4,425. C) Debit Cash $4,575; credit
Interest Revenue $75; credit Notes Payable $4,500. D) Debit Notes Payable $4,500; debit
Interest Expense $112; credit Cash $4,612. - ✔✔A) Debit Notes Payable $4,500; debit Interest
Expense $75; credit Cash $4,575
Athena Company provides employee health insurance that costs $5,000 per month. In addition,
the company contributes an amount equal to 5% of the employees' $120,000 gross salary to a
retirement program. The entry to record the accrued benefits for the month would include a
A) Debit to Medical Insurance Payable $5,000.
B) Debit to Employee Retirement Program Payable $6,000.
C) Debit to Employee Benefits Expense $11,000.
D) Debit to Payroll Taxes Expense $11,000. - ✔✔C) Debit to Employee Benefits Expense
$11,000.
3. During June, Vixen Company sells $850,000 in merchandise that has a one year warranty.
Experience shows that warranty expenses average about 3% of the selling price. Customers
returned $14,000 of merchandise for warranty replacement during the month. The entry to
settle the customer warranties is: A) Debit Warranty Expense $14,000; credit Estimated
Warranty Liability $14,000
B) Debit Estimated Warranty Liability $14,000; credit Merchandise Inventory $14,000 C) Debit
Estimated Warranty Liability $11,500; credit Merchandise Inventory $11,500 D) Debit Estimated
Warranty Liability $25,500; credit Warranty Expense $25,500 - ✔✔B) Debit Estimated Warranty
Liability $14,000; credit Merchandise Inventory $14,000
, 4. Contingent liabilities are recorded or disclosed unless they are:
A) Probable and estimable.
B) Probable and not estimable.
C) Remote.
D) Possible and estimable. - ✔✔C) Remote.
$100,000 in 5 year bonds are issued on January 1 at par by a company with a stated rate of
interest of 6% with interest paid semi-annually on June 30 and December 31 (use 360 day year).
The journal entry on December 31 of the first year is:
A) Debit Bonds Payable $100,000; Credit Cash $100,000
B) Debit Interest Expense $3,000; Credit Interest Payable $3,000
C) Debit Interest Expense $6,000; Credit Cash $6,000
D) Debit Interest Expense $3,000; Credit Cash $3,000 - ✔✔D) Debit Interest Expense $3,000;
Credit Cash $3,000
On January 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment
note requiring annual equal payments each December 31 of $37,258. What is the journal entry
to record the second annual payment?
A) Debit Notes Payable $37,258; credit Cash $37,258.
B) Debit Interest Expense $20,000; debit Notes Payable $17,258; credit Cash $37,258. C) Debit
Interest Expense $37,258; credit Cash $37,258.
D) Debit Interest Expense $18,619; debit Notes Payable $18,639; credit Cash $37,258 - ✔✔B)
Debit Interest Expense $20,000; debit Notes Payable $17,258; credit Cash $37,258
On January 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment
note requiring annual equal payments each December 31 of $37,258. What is the balance in the
Installment Note account after the second annual payment?
A) $250,000
B) $214,103
C) $0
