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Ten questions - financial accounting

1. Mary Parker Co. invested $15,000 in ABC Corporation and received stock in exchange. Mary Parker Co.'s journal entry to record this transaction would include a:
Debit to investments.
Credit to retained earnings.
Credit to capital stock
Debit to expense.

2. In its first year of operations Acme Corp. had income before tax of $400,000. Acme made income tax payments totaling $150,000 during the year and has an income tax rate of 40%. What would be the balance in income tax payable at the end of the year?
$160,000 credit.
$150,000 credit.
$ 10,000 credit.
$ 10,000 debit.

3. On November 1, 20X8, Tim's Toys borrows $30,000,000 at 9% to finance the holiday sales season. The note is for a six-month term and both principal and interest are payable at maturity. What should be the balance of interest payable for the loan as of December 31, 20X8?
$ 112,500.
$ 225,000.
$ 450,000.

4. Eve's Apples opened business on January 1, 20X8, and paid for two insurance policies effective that date. The liability policy was $36,000 for eighteen-months, and the crop damage policy was $12,000 for a two-year term. What was the balance in Eve's prepaid insurance as of December 31, 20X8?

5. Which of the following adjusting entries creates an increase in liabilities (Points: 1)
Accruing unrecorded interest expense.
Recording the amount of expired prepaid insurance.
Accruing unrecorded interest revenue.
Recording depreciation expense.

6. The Esquire Clothing Company borrowed a sum of cash on October 1, 2007, and signed a note payable. The annual interest rate was 12% and the company's year 2007 income statement reported interest expense of $1,260 related to this note. What was the amount borrowed?

7. When an employer makes an end-of-period adjusting entry with a debit to supplies expense, the usual credit entry is made to:

8. The Jansen Company showed a $19,500 liability on its 2008 balance sheet for unearned subscription revenue. During 2009, $54,400 was received from customers for subscriptions and the 2009 income statement reported subscription revenue of $71,100. What is the liability amount for unearned subscription revenue that will appear in the 2009 balance sheet?

9. Carolina Mills purchased $270,000 in supplies this year. The supplies account increased by $10,000 during the year to an ending balance of $66,000. What was supplies expense for Carolina Mills during the year?

10. Herrera Company received $3,600 on October 1, 2008 for one year's rent in advance and recorded the transaction with a credit to the rent revenue account. The December 31, 2008 adjusting entry is:

(Be sure and mention account(s) debited and credited.)

Solution Preview

1. Debit to investments, Credit to cash.

2. $10,000 credit. Total liability would be $160,000 of which $150,000 has been paid.

3. $30,000,000 x 9% x 2 /12 months = $450,000

4. $36,000 x 12 / 18 months = $24,000 PLUS $12,000 x 12 / 24 months = $6,000. Total for both = $30,000

5. Recording the amount of expired prepaid insurance and ...

Solution Summary

For each of the 10 questions, the solution gives a sentence or two of explanation which includes the calculation details that were used to arrive at the solution.