CHAPTER 7 PRACTICE QUESTIONS
WITH 100% CORRECT ANSWERS
Recording tannual tbad tdebt texpense tby t_____________ tviolates tthe texpense
trecognition tconcept.
a. tPercentage tof tsales
b. tDirect twrite-off
c. tPercentage tof tending taccounts treceivable
d. tPercentage tof taverage taccounts treceivable t- tcorrect tanswers-Direct twrite-off
What tis tthe tequivalent teffective tannual tinterest trate tif tmerchandise tis tpurchased
twith ta tcash tdiscount tterm tof t2/10, tn/30?
a. t2%
, b. t24%
c. t18%
d. t36% t- tcorrect tanswers-36%
On tJanuary t1, t2020, tHat tTrick tManufacturing texchanged tsome tequipment tfor ta
t$750,000 tzero-interest-bearing tnote tdue ton tJanuary t1, t2023. tThe tprevailing
tinterest tfor ta tnote tof tthis ttype ton tJanuary t1, t2020 twas t10%. tThe tpresent tvalue
tof t$1 tat t10% tfor tthree tperiods tis t0.75. tHat tTrick tManufacturing tincluded
t__________ tas tinterest trevenue ton tthe t2021 tincome tstatement.
a. t$60,469
b. t$0
c. t$56,250
d. t$61,875 t- tcorrect tanswers-$61,875
Algeron tInc. tdecides tto tuse tthe tfair tvalue toption ton tthe tfirst tvaluation tof trecently
tacquired tnotes treceivable. tThe tnotes thave ta tfair tvalue tof t$620,000 tand ta
tcarrying tamount tof t$410,000. tWhat twould tbe tincluded tin tthe tadjusting tentry tto
trecord tthis tchange?
a. tCredit tto tunrealized tholding tgain tor tloss--income tof t$210,000.
b. tCredit tto tnotes treceivable tfor t$210,000.
c. tDebit tto tunrealized tholding tgain tor tloss--income tof t$210,000.
d. tDebit tto tnotes treceivable tfor t$620,000. t- tcorrect tanswers-Credit tto tunrealized
tholding tgain tor tloss--income tof t$210,000.
Which tof tthe tfollowing twould tnot tcause tan tincrease tin tthe tcash taccount?
a. tPutting tmoney tinto ta tsavings taccount.
b. tPutting tmoney tinto ta tmoney tmarket tsavings tcertificate.
c. tPutting tmoney tinto tthe tpetty tcash tfund.
d. tPutting tmoney tinto ta tmoney tmarket tfund twith tchecking tprivilege. t- tcorrect
tanswers-Putting tmoney tinto ta tmoney tmarket tsavings tcertificate.
On tMarch t22, tLine tDrive tApparel tsold t$15,500 tof tinventory titems ton tcredit twith
tthe tterms t2/15, tn/30. tPayment ton t$9,500 tsales twas treceived ton tApril t1 tand tthe
tremaining tpayment twas treceived ton tApril t21. tHow twould tLine tDrive tApparel
trecord tthe tcash treceived ton tApril t1 tunder tthe tgross tmethod.
a. tCash t$9,310
tAccounts treceivable t$9,310
b. tAccounts treceivable t$120
tSales tdiscounted tforfeited t$120
c. tCash t$9,500
tAccounts treceivable t$9,500
d. tCash t$9,310
tSales tdiscount t$190
tAccounts treceivable t$9,500 t- tcorrect tanswers-Cash t$9,310
Sales tdiscount t$190
tAccounts treceivable t$9,500
WITH 100% CORRECT ANSWERS
Recording tannual tbad tdebt texpense tby t_____________ tviolates tthe texpense
trecognition tconcept.
a. tPercentage tof tsales
b. tDirect twrite-off
c. tPercentage tof tending taccounts treceivable
d. tPercentage tof taverage taccounts treceivable t- tcorrect tanswers-Direct twrite-off
What tis tthe tequivalent teffective tannual tinterest trate tif tmerchandise tis tpurchased
twith ta tcash tdiscount tterm tof t2/10, tn/30?
a. t2%
, b. t24%
c. t18%
d. t36% t- tcorrect tanswers-36%
On tJanuary t1, t2020, tHat tTrick tManufacturing texchanged tsome tequipment tfor ta
t$750,000 tzero-interest-bearing tnote tdue ton tJanuary t1, t2023. tThe tprevailing
tinterest tfor ta tnote tof tthis ttype ton tJanuary t1, t2020 twas t10%. tThe tpresent tvalue
tof t$1 tat t10% tfor tthree tperiods tis t0.75. tHat tTrick tManufacturing tincluded
t__________ tas tinterest trevenue ton tthe t2021 tincome tstatement.
a. t$60,469
b. t$0
c. t$56,250
d. t$61,875 t- tcorrect tanswers-$61,875
Algeron tInc. tdecides tto tuse tthe tfair tvalue toption ton tthe tfirst tvaluation tof trecently
tacquired tnotes treceivable. tThe tnotes thave ta tfair tvalue tof t$620,000 tand ta
tcarrying tamount tof t$410,000. tWhat twould tbe tincluded tin tthe tadjusting tentry tto
trecord tthis tchange?
a. tCredit tto tunrealized tholding tgain tor tloss--income tof t$210,000.
b. tCredit tto tnotes treceivable tfor t$210,000.
c. tDebit tto tunrealized tholding tgain tor tloss--income tof t$210,000.
d. tDebit tto tnotes treceivable tfor t$620,000. t- tcorrect tanswers-Credit tto tunrealized
tholding tgain tor tloss--income tof t$210,000.
Which tof tthe tfollowing twould tnot tcause tan tincrease tin tthe tcash taccount?
a. tPutting tmoney tinto ta tsavings taccount.
b. tPutting tmoney tinto ta tmoney tmarket tsavings tcertificate.
c. tPutting tmoney tinto tthe tpetty tcash tfund.
d. tPutting tmoney tinto ta tmoney tmarket tfund twith tchecking tprivilege. t- tcorrect
tanswers-Putting tmoney tinto ta tmoney tmarket tsavings tcertificate.
On tMarch t22, tLine tDrive tApparel tsold t$15,500 tof tinventory titems ton tcredit twith
tthe tterms t2/15, tn/30. tPayment ton t$9,500 tsales twas treceived ton tApril t1 tand tthe
tremaining tpayment twas treceived ton tApril t21. tHow twould tLine tDrive tApparel
trecord tthe tcash treceived ton tApril t1 tunder tthe tgross tmethod.
a. tCash t$9,310
tAccounts treceivable t$9,310
b. tAccounts treceivable t$120
tSales tdiscounted tforfeited t$120
c. tCash t$9,500
tAccounts treceivable t$9,500
d. tCash t$9,310
tSales tdiscount t$190
tAccounts treceivable t$9,500 t- tcorrect tanswers-Cash t$9,310
Sales tdiscount t$190
tAccounts treceivable t$9,500
