Falon Company accepted a credit card account receivable

1.Falon Company accepted a credit card account receivable in exchange for $50,000 of services provided to a customer. The credit card company charges a 3% service charge. Recording the service revenue and the service charge would: (Points : 2)

decrease expenses by $1,500.
increase assets by $50,000.
increase assets by $48,500.
A and C.

Question 2.2.On January 1, 2010 the Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $30,000 and $500, respectively. During the year the company reported $75,000 of credit sales. There were $550 of receivables written-off as uncollectible in 2010. Cash collections of receivables amounted to $74,550. The company estimates that it will be unable to collect one percent (1%) of credit sales. The amount of uncollectible accounts expense recognized in the 2010 income statement will be: (Points : 2)

$700
$300
$750
$550

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Question 3.3.Howard Company accepts a credit card as payment for $950 of services provided to a customer. The credit card company charges a 4% fee for its services. Select the answer that shows how the entry to record the service revenue would affect Barlett’s financial statements.

Row	Assets	=	Liab.	+	Equity	Rev.	–	Exp.	=	Net Inc.	Cash Flow
One	912	=	NA	+	912	950	–	38	=	912	NA
Two	912	=	38	+	874	912	–	NA	=	912	NA
Three	912	=	NA	+	912	912	–	NA	=	912	912 OA
Four	950	=	NA	+	950	950	–	NA	=	950	950 OA

(Points : 2)

Row One
Row Two
Row Three
Row Four

Question 4.4.The accounting records of the Schaller Company and Quimby Company contained the following account balances:

Account Title	Schaller	Quimby
Accounts Receivable	$75,200	$123,400
Sales	451,200	617,000

Select the true statement from the following options: (Points : 2)

The accounts receivable for Schaller Company turned over 6 times per year.
The company with the higher turnover ratio will also have the longer average number of days to collect accounts receivable.
Quimby Company is guaranteed to incur lower costs from extending credit to customers than Schaller Company.
The average number of days to collect accounts receivable for Schaller is 109 days.

Question 5.5.For a business, the advantage of offering credit to customers is that it: (Points : 2)

increases the amount of sales.
increases cash flow from financing activities.
decreases cost of goods sold.
decreases the amount of inventory the company needs to carry.

Question 6.6.On July 1, 2010, Siebens Enterprises loaned $20,000 to Tyler Company for one year at 8 percent interest. Under the terms of the promissory note, Tyler will repay the principal and pay one year’s interest on May 31, 2011. Related to this note receivable, what amount of interest income would Siebens report on its December 31, 2010 income statement? (Points : 2)

$1,000
$1,600
$800
$933

Question 7.7.The amount of accounts receivable that is actually expected to be collected is known as: (Points : 2)

net realizable value.
uncollectible accounts expense.
accounts receivable turnover.
allowance for doubtful accounts.

Question 8.8.On July 1, 2010, Siebens Enterprises loaned $20,000 to Tyler Company for one year at 8 percent interest. Under the terms of the promissory note, Tyler will repay the principal and pay one year’s interest on May 31, 2011. Related to this note receivable, what amount of interest income would Siebens report on its 2011 income statement? (Points : 2)

$667
$600
$800
$0

Question 9.9.Zabinski Co. paid $150,000 for a purchase that included land, building, and office furniture. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Land, $20,000, Building, $150,000, and Office furniture, $30,000. Based on this information the cost that would be allocated to the land is: (Points : 2)

$17,500
$20,000
$25,000
$15,000

Question 10.10.Mobley Company purchased an asset with a list price of $35,000. Mobley received a 2% cash discount. The asset was delivered under terms FOB shipping point, and freight costs amounted to $700. Mobley paid $1,500 to have the asset installed. Insurance costs to protect the asset from fire and theft amounted to $400 for the first year of operations. Based on this information, the cost recorded in the asset account would be: (Points : 2)

$36,500
$36,900
$35,000
$35,800

Question 11.11.On March 1, Zane Company purchased a new stamping machine with a list price of $24,000. The company paid cash for the machine; therefore, it was allowed a 3% discount. Other costs associated with the machine were: transportation costs, $1,270; sales tax paid, $1,680; installation costs, $450; routine maintenance during the first month of operation, $500. The cost recorded for the machine was: (Points : 2)

$23,730
$24,000
$25,960
$26,680

Question 12.12.Which of the following is an intangible asset with an identifiable useful life? (Points : 2)

Copyrights
Renewable franchises
Goodwill
Trademarks

Question 13.13.On January 1, 2009, Ziskin Company spent $3,000 on an asset to improve its quality. The asset had been purchased on January 1, 2006 for $14,000. The asset had a $2,000 salvage value and a 6-year life. Ziskin uses straight-line depreciation. What would be the book value of the asset on January 1, 2010? (Points : 2)

$11,000
$8,000
$6,000
$7,200

Question 14.14.The Harlow Company purchased the Hampton Company for $600,000 cash. The fair market value of Hampton’s assets was $520,000 and the company had liabilities of $30,000. What amount of goodwill should Harlow record related to the purchase of Hampton Company? (Points : 2)

$110,000
$50,000
$80,000
$0

Question 15.15.The recognition of depletion expense acts to: (Points : 2)

decrease assets and equity and increase cash flow from operating expenses.
increase cash flow from operating activities and does not affect the amount of total assets.
increase assets, equity, and cash flow from operating activities.
decrease assets and equity, with no effect on cash flow.

Question 16.16.The fair value of the assets and liabilities for Zane’s Restaurant were $450,000 and $160,000, respectively. If Reiner Company pays $325,000 cash for the restaurant and assumes its existing liabilities, what amount of goodwill would Reiner record? (Points : 2)

$25,000
$35,000
$55,000
$125,000

Question 17.17.Parker Company purchased Eynon Corporation in 2004, recording $80,000 in goodwill at the time of purchase. In January, 2009, Parker decides that the value of the goodwill has declined substantially due to local economic and demographic changes. Parker estimates that the true value of the goodwill should only be $30,000. Which of the following shows the effect of this situation on the financial statements?

Row	Assets	=	Liabilities	+	Equity	Revenue	–	Expenses	=	Net Inc.	Cash
One	–	=	+	+	NA	NA	–	NA	=	NA	NA
Two	–	=	NA	+	–	NA	–	+	=	NA	– IA
Three	NA	=	NA	+	NA	NA	–	NA	=	NA	NA
Four	–	=	NA	+	–	NA	–	+	=	–	NA

(Points : 2)

Row One
Row Two
Row Three
Row Four

Question 18.18.In a period of rising prices, which inventory cost flow method will produce the lowest amount of cost of goods sold? (Points : 2)

FIFO
Weighted average
LIFO
All methods will produce the same amount of cost of goods sold

Question 19.19.The inventory records for Freer reflected the following:

Jan 1	Beginning Inventory	300 units @ $2.10
Jan 12	First Purchase	400 units @ $2.40
Jan 21	Second Purchase	600 units @ $2.50
Jan 31	Sales	800 units @ $5.00

What was Freer’s gross margin for the month of January assuming a FIFO cost flow method? (Points : 2)

$2,160
$2,410
$2,260
$2,320

Question 20.20.The accounting principle that requires a company to provide financial statement users with information about the accounting methods it has selected (including inventory cost flow methods) is the: (Points : 2)

consistency principle.
conservatism principle.
full disclosure principle.
the historical cost principle.

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