ACCT 201 ACTUAL 2026 EXAM QUESTIONS AND ANSWERS
GRADED A+
✔✔Credit card sales - ✔✔involve three parties: the credit card issuer, the retailer, and
the customer
retailer records: dr. cash, dr. service charge expense, cr. sales revenue
✔✔Promissory note - ✔✔a written promise to pay a specified amount of money on
demand or at a definite time
- maker: the party making the promise to pay
- payee: the party to whom payment is to be made
✔✔Determining the maturity date - ✔✔- expressed in terms of months or days
- when counting days, omit the date the note is issued but include the due date
✔✔Computing interest - ✔✔= face value of note x annual interest rate x time in terms of
one year (#days/360)
✔✔Recognizing notes - ✔✔to settle open account: dr. notes receivable, cr. A/R
- to record acceptance of note, no interest revenue reported
to lend money: dr. notes, cr. cash
✔✔Valuing notes - ✔✔companies report short-term notes receivable at their cash (net)
realizable vlaue
✔✔Honoring notes - ✔✔when its maker pays in full at its maturity date
maturity value: amount due at maturity: face value + interest
✔✔Accrual of interest - ✔✔to reflect interest earned but not yet received: dr. interest
receivable, cr. interest revenue [for amount earned so far]
at note's maturity date, when paid in full: dr. cash [total amount], cr. notes receivable
[face value], cr. interest receivable [for amount interest earned so far, previously
recorded], cr. interest revenue [remaining interest amount]
✔✔Dishonoring of notes - ✔✔aka defaulted note: not paid in full at maturity
- dr. A/R [total amount], cr. notes receivable [face value], cr. interest revenue [amount
interest]
✔✔Presentation of notes - ✔✔companies should identify in the balance sheet or in the
notes to the financial statements each of the major types of receivables.
- short-term receivables : current assets section of balance sheet
- short-term investments : before short-term receivables in current assets section (b/c
more liquid)
- both the gross amount of receivables and the allowance for doubtful accounts
, - bad debt expense and service charge expense : selling expenses in operating
expenses section of multi-step income statement
- interest revenue : "other revenues and gains" in nonoperating activities section of
income statement
✔✔Plant assets - ✔✔resources that have three characteristics
- have a physical substance (a definite shape and size)
- are used in the operations of a business
- not intended for sale to customers
aka PPE, fixed assets
✔✔Determining cost of plant assets - ✔✔historical cost principle requires that
companies record plant assets at cost, which consists of *all expenditures necessary to
acquire the asset and make it ready for its intended use*
✔✔Land - ✔✔cost includes
- the cash purchase price
- closing costs (such as title and attorney's fees)
- real estate brokers' commissions
- accrued property taxes and other liens assumed by purchaser
debit land account all necessary costs incurred to make ready for its intended use
(expenditures for clearing, draining, filling, and grading)
✔✔Land improvements - ✔✔structural additions made to land (driveways, parking lots,
fences, etc.)
- debit land improvement account total of all costs
- expense (depreciate) cost over their useful lives
✔✔Buildings - ✔✔facilities used in operations (such as stores, offices, factories, etc.)
- debit building account all necessary expenditures related to the purchase or
construction of a building (remodeling and replacing or repairing the roof, floors, wiring,
plumbing, construction costs)
✔✔Equipment - ✔✔includes assets used in operations (such as store check-out
counters, office furniture, factory machinery, delivery trucks, airplanes)
✔✔Expenditures during useful life - ✔✔during the useful life of a plant asset, a company
may incur costs for
- ordinary repairs: aka revenue expenditures; to maintain the operating efficiency and
productive life of the unit (usually small amounts that occur frequently); debit
maintenance and repairs expense
- additions and improvements: aka capital expenditures; to increase the operating
efficiency, productive capacity, or useful life of a plant asset; debit to plant asset
affected
GRADED A+
✔✔Credit card sales - ✔✔involve three parties: the credit card issuer, the retailer, and
the customer
retailer records: dr. cash, dr. service charge expense, cr. sales revenue
✔✔Promissory note - ✔✔a written promise to pay a specified amount of money on
demand or at a definite time
- maker: the party making the promise to pay
- payee: the party to whom payment is to be made
✔✔Determining the maturity date - ✔✔- expressed in terms of months or days
- when counting days, omit the date the note is issued but include the due date
✔✔Computing interest - ✔✔= face value of note x annual interest rate x time in terms of
one year (#days/360)
✔✔Recognizing notes - ✔✔to settle open account: dr. notes receivable, cr. A/R
- to record acceptance of note, no interest revenue reported
to lend money: dr. notes, cr. cash
✔✔Valuing notes - ✔✔companies report short-term notes receivable at their cash (net)
realizable vlaue
✔✔Honoring notes - ✔✔when its maker pays in full at its maturity date
maturity value: amount due at maturity: face value + interest
✔✔Accrual of interest - ✔✔to reflect interest earned but not yet received: dr. interest
receivable, cr. interest revenue [for amount earned so far]
at note's maturity date, when paid in full: dr. cash [total amount], cr. notes receivable
[face value], cr. interest receivable [for amount interest earned so far, previously
recorded], cr. interest revenue [remaining interest amount]
✔✔Dishonoring of notes - ✔✔aka defaulted note: not paid in full at maturity
- dr. A/R [total amount], cr. notes receivable [face value], cr. interest revenue [amount
interest]
✔✔Presentation of notes - ✔✔companies should identify in the balance sheet or in the
notes to the financial statements each of the major types of receivables.
- short-term receivables : current assets section of balance sheet
- short-term investments : before short-term receivables in current assets section (b/c
more liquid)
- both the gross amount of receivables and the allowance for doubtful accounts
, - bad debt expense and service charge expense : selling expenses in operating
expenses section of multi-step income statement
- interest revenue : "other revenues and gains" in nonoperating activities section of
income statement
✔✔Plant assets - ✔✔resources that have three characteristics
- have a physical substance (a definite shape and size)
- are used in the operations of a business
- not intended for sale to customers
aka PPE, fixed assets
✔✔Determining cost of plant assets - ✔✔historical cost principle requires that
companies record plant assets at cost, which consists of *all expenditures necessary to
acquire the asset and make it ready for its intended use*
✔✔Land - ✔✔cost includes
- the cash purchase price
- closing costs (such as title and attorney's fees)
- real estate brokers' commissions
- accrued property taxes and other liens assumed by purchaser
debit land account all necessary costs incurred to make ready for its intended use
(expenditures for clearing, draining, filling, and grading)
✔✔Land improvements - ✔✔structural additions made to land (driveways, parking lots,
fences, etc.)
- debit land improvement account total of all costs
- expense (depreciate) cost over their useful lives
✔✔Buildings - ✔✔facilities used in operations (such as stores, offices, factories, etc.)
- debit building account all necessary expenditures related to the purchase or
construction of a building (remodeling and replacing or repairing the roof, floors, wiring,
plumbing, construction costs)
✔✔Equipment - ✔✔includes assets used in operations (such as store check-out
counters, office furniture, factory machinery, delivery trucks, airplanes)
✔✔Expenditures during useful life - ✔✔during the useful life of a plant asset, a company
may incur costs for
- ordinary repairs: aka revenue expenditures; to maintain the operating efficiency and
productive life of the unit (usually small amounts that occur frequently); debit
maintenance and repairs expense
- additions and improvements: aka capital expenditures; to increase the operating
efficiency, productive capacity, or useful life of a plant asset; debit to plant asset
affected
