Q&A Hero

Q: A company has the following transactions during March: March 3 Purchases inventory on account for $3,500, terms 2/10, n/30. March 5 Pays freight costs of $200 on inventory purchased on March 3. March 6 Returns inventory with a cost of $500. March 12 Pays the full amount due on March 3 purchase. March 29 Sells all inventory purchased on March 3 (less those returned on March 6) for $5,000 on account. Record all transactions, assuming the company uses a perpetual inventory system.

Q: A $10,000 note that has a stated interest rate of 10% and is due in six months would have interest of $1,000.

Q: A company expects 5% of its newer accounts receivable to be uncollectible and 20% of its older accounts to be uncollectible. If the company has $40,000 of newer accounts and $5,000 of older accounts, the total estimate of uncollectible accounts is $2,000.

Q: A company reports the following amounts at the end of the year (before any year-end adjustment). Credit sales for the year $120,000 Accounts receivable 36,000 Allowance for uncollectible accounts 1,500 (credit) Record the adjustment for uncollectible accounts (1) using the percentage-of-receivables method, assuming the company estimates 10% of receivables will not be collected, and (2) using the percentage-of-credit-sales method, assuming the company estimates 2% of credit sales will not be collected.

Q: On May 1, 2015, a company lends $100,000 to one of its main suppliers and accepts a 12-month, 6% note. Record the acceptance of the note on May 1, 2015, the adjustment on December 31, 2015, and the cash collection on May 1, 2016.

Q: On April 1, a company provides services to one of its customers for $12,000. As payment for the services, the company accepts a six-month, 10% note from the customer. Record the acceptance of the note receivable on April 1 and the cash collection on October 1.

Q: Calculate the missing amount for each of the following notes receivable. Face Value Annual Interest rate Fraction of the Year Interest $15,000 4% 8 months (a) $25,000 8% (b) $500 $30,000 (c) 4 months $500 (d) 6% 6 months $600

Q: A company has the following balances on December 31, 2015, before any year-end adjustments: Accounts Receivable = $80,000; Allowance for Uncollectible Accounts = $1,100 (credit). The company estimates uncollectible accounts based on an aging of accounts receivable as shown below: Age Group Amount Receivable Estimated Percent Uncollectible Not yet due $48,000 5% 030 days past due 18,000 15% 3190 days past due 10,000 40% More than 90 days past due 4,000 80% Total $80,000 Record the adjustment for uncollectible accounts on December 31, 2015.

Q: At the end of the year, a company has the following accounts receivable and estimates of uncollectible accounts: 1. Accounts not yet due = $70,000; estimated uncollectible = 4%. 2. Accounts 130 days past due = $30,000; estimated uncollectible = 15%. 3. Accounts more than 30 days past due = $5,000; estimated uncollectible = 40%. Record the year-end adjustment for uncollectible accounts, assuming the current balance of the Allowance for Uncollectible Accounts is $1,200 (debit).

Q: At the end of the year, a company has the following accounts receivable and estimates of uncollectible accounts: 1. Accounts not yet due = $80,000; estimated uncollectible = 2%. 2. Accounts 130 days past due = $20,000; estimated uncollectible = 25%. 3. Accounts more than 30 days past due = $4,000; estimated uncollectible = 60%. Record the year-end adjustment for uncollectible accounts, assuming the current balance of the Allowance for Uncollectible Accounts is $900 (credit).

Q: A company has the following accounts receivable and estimates of uncollectible accounts: 1. Accounts not yet due = $60,000; estimated uncollectible = 3%. 2. Accounts 130 days past due = $20,000; estimated uncollectible = 20%. 3. Accounts more than 30 days past due = $10,000; estimated uncollectible = 50%. Compute the total estimated uncollectible accounts.

Q: A company has the following balances on December 31, 2015, after year-end adjustments: Accounts Receivable = $75,000; Service Revenue = $400,000; Allowance for Uncollectible Accounts = $5,000; Cash = $20,000. Calculate the net realizable value of accounts receivable.

Q: A company has the following balances on December 31, 2015, after year-end adjustments: Accounts Receivable = $62,000; Allowance for Uncollectible Accounts = $6,000. Calculate the net realizable value of accounts receivable.

Q: During 2015, its first year of operations, a company provides services on account of $250,000. By the end of 2015, cash collections on these accounts total $130,000. The company estimates that 10% of accounts receivable will be uncollectible. Record the adjustment for uncollectible accounts on December 31, 2015.

Q: At the end of the year, a company has a balance in Allowance for Uncollectible Accounts of $2,000 (debit) before any year-end adjustment. The balance of Accounts Receivable is $180,000. The company estimates that 5% of accounts receivable will not be collected over the next year. Record the adjustment for uncollectible accounts.

Q: At the end of the year, a company has a balance in Allowance for Uncollectible Accounts of $2,000 (credit) before any year-end adjustment. The balance of Accounts Receivable is $180,000. The company estimates that 5% of accounts receivable will not be collected over the next year. Record the adjustment for uncollectible accounts.

Q: At the end of the year, a company has a balance in Allowance for Uncollectible Accounts of $200 (credit) before any year-end adjustment. The balance of Accounts Receivable is $15,000. The company estimates that 10% of accounts receivable will not be collected over the next year. Record the adjustment for uncollectible accounts.

Q: On October 22, a company provides services on account to a customer for $1,800, terms 3/15, n/30. The customer pays for those services on December 19. Record the transactions for the company when the services are provided on October 22 and when cash is collected on December 19.

Q: On September 8, a company provides services on account to a customer for $1,500, terms 2/10, n/30. The customer pays for those services on September 15. Record the transactions for the company when the services are provided on September 8 and when the cash is collected on September 15.

Q: A company reports the following amounts at the end of the year: Total sales = $400,000; cash = $35,000; sales discounts = $10,000; accounts receivable = $20,000; sales returns = $15,000; operating expenses = $70,000; sales allowances = $25,000. Compute net revenues.

Q: A company reports the following amounts at the end of the year: Total sales = $500,000; sales discounts = $10,000; sales returns = $30,000; sales allowances = $20,000. Compute net revenues.

Q: Suppose Casey Title Company normally charges $500 for services related to selling a house. As part of a summer special, Casey offers customers a trade discount of 20%. On July 9, Linda Holmes uses the services of Casey and pays cash equal to the discounted price. Record the revenue earned by Casey on July 9.

Q: A company had the following transactions during the year: 1. Paid rent for the next two years, $8,000. 2. Purchased office supplies on account, $2,400. 3. Purchased equipment, paying $12,000 cash and issuing a note payable for $4,000. 4. Borrowed from the bank, $6,000. 5. Paid employee salaries, $7,200. 6. Paid $2,000 on account related to transaction 2 above. 7. Paid dividends to stockholders, $2,800. 8. Sold land for $10,000 that was purchased in a prior year for $7,500. 9. Collected cash from customers for services provided, $25,700. Calculate cash flows from operating activities, investing activities, and financing activities.

Q: During the year, a company issues common stock for $50,000 and repays previously borrowed amounts of $75,000. In addition, the company pays dividends of $5,000 to stockholders. Determine the amount of financing cash flows the company will report in the current year.

Q: A company lends $30,000 with 10% interest on May 1, 2015. This amount plus interest is due on April 30, 2016. Record the adjusting entry on December 31, 2015.

Q: A company borrows $20,000 with 8% interest on October 1, 2015. This amount plus interest is due on September 30, 2016. Record the adjusting entry on December 31, 2015.

Q: A company pays its employees $5,600 every two weeks ($400/day). The current two-week pay period ends on December 26, 2015, and employees are paid $5,600. The next two-week pay period ends on January 9, 2016, and employees will be paid $5,600. Record the adjusting entry on December 31, 2015.

Q: Suppose a customer rents a vehicle for four months from Rent-A-Car on October 1, paying $4,000 ($1,000/month). Record Rent-A-Cars adjusting entry on December 31.

Q: A company purchases one year of flood insurance in advance on May 1, paying $24,000 ($2,000/month). Record the adjusting entry on December 31.

Q: Suppose a company rents office space for one year, paying $12,000 ($1,000/month) in advance on September 1. Record the adjusting entry on December 31.

Q: At the beginning of the period, a company reports a balance in office supplies of $500. During the period, the company purchases an additional $3,500 of office supplies for cash. By the end of the period, only $700 of office supplies remains. Record the period-end adjusting entry.

Q: The following data are taken from the cash-basis accounting records of Myerson Company for the year ended December 31, 2015: Selected Data as of December 31, 2015 Customers billed in 2015 for services provided $400,000 Cash collections in 2015 for accounts billed in 2014 20,000 Cash collections in 2015 for accounts billed in 2015 300,000 Cash paid for supplies purchased in 2015 12,000 Supplies remaining at the end of 2015 2,000 Cash paid for salaries in 2015 10,000 Cash paid for annual rent on March 1, 2015 18,000 Calculate the amount of revenues and expenses for 2015 under accrual-basis accounting.

Q: Frosty Inc. has the following balances on December 31 prior to closing entries: Revenues $35,000 Retained Earnings, Jan. 1 10,000 Cash 7,000 Expenses 23,000 Accounts Payable 4,000 Dividends 1,000 Supplies 18,000 Based upon the balances above, what net adjustment would be made to Retained Earnings due to closing entries? a. Increase of $11,000. b. Increase of $13,000. c. Increase of $12,000. d. Increase of $14,000.

Q: The Retained Earnings account had a beginning credit balance of $26,000. During the period, the business had a net loss $12,000, and the company paid dividends of $8,000. The ending balance in the Retained Earnings account is: a. $6,000. b. $30,000. c. $22,000. d. $14,000.

Q: The ending Retained Earnings balance of Juan's Mexican Restaurant chain increased by $3.2 million from the beginning of the year. The company declared a dividend of $1.3 million during the year. What was the net income earned during the year? a. $1.9 million. b. $3.2 million. c. $4.5 million. d. $1.3 million.

Q: The following table contains financial information for Trumpeter Inc. before closing entries: Cash $12,000 Supplies 4,500 Prepaid Rent 2,000 Salary Expense 4,500 Equipment 65,000 Service Revenue 30,000 Miscellaneous Expenses 20,000 Dividends 3,000 Accounts Payable 5,000 Common Stock 68,000 Retained Earnings 8,000 What is Trumpeters net income? a. $3,500. b. $2,500. c. $5,000. d. $5,500.

Q: Eve's Apples opened for business on January 1, 2015, 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 account as of December 31, 2015? a. $ 9,000. b. $18,000. c. $30,000. d. $48,000.

Q: On April 1, a $4,800 premium on a one-year insurance policy on equipment was paid and charged to Prepaid Insurance. At the end of the year, the financial statements would report: a. Insurance Expense, $4,800; Prepaid Insurance $0. b. Insurance Expense, $3,600; Prepaid Insurance $1,200. c. Insurance Expense, $3,650; Prepaid Insurance $4,800. d. Insurance Expense, $1,200; Prepaid Insurance $3,600.

Q: The employees of Neat Clothes work Monday through Friday. Every other Friday the company issues payroll checks totaling $32,000. The current pay period ends on Friday, January 3. Neat Clothes is now preparing financial statements for the year ended December 31. What is the adjusting entry to record accrued salaries at the end of the year? a. Salaries Payable 22,400 Salaries Expense 22,400 b. Salaries Expense 6,400 Salaries Payable 6,400 c. Salaries Expense 9,600 Salaries Payable 9,600 d. Salaries Expense 22,400 Salaries Payable 22,400

Q: Yummy Foods purchased a one-year hazard insurance policy on August 1 and recorded the $4,200 premium to prepaid insurance. At its December 31 year-end, Yummy Foods would record which of the following adjusting entries? a. Insurance Expense 1,750 Prepaid Insurance 1,750 b. Prepaid Insurance 1,750 Insurance Expense 1,750 c. Insurance Expense 1,750 Prepaid Insurance 2,450 Accounts Payable 4,200 d. Insurance Expense 2,450 Prepaid Insurance 2,450

Q: If the beginning balance of Retained Earnings equals $10,000, net income for the year equals $6,000, and dividends for the year equal $2,000, then the ending balance of Retained Earnings equals $18,000.

Q: Suppose Simeon Company begins the year with $1,000 in supplies, purchases an additional $5,500 of supplies during the year, and ends the year with $700 in supplies. The year-end adjusting entry includes Supplies Expense of $7,200.

Q: Consider the following T-account for Accounts Payable. 1. Compute the balance of the Accounts Payable account. 2. Give an example of a transaction that would have resulted in the $8,800 posting to the account. 3. Give an example of a transaction that would have resulted in the $4,500 posting to the account. Answer: 3. Give an example of a transaction that would have resulted in the $4,500 posting to the account.

Q: If a company has stockholders equity of $60,000 at the end of the year, which of the following statements must be true? a. The companys assets exceed liabilities by $60,000. b. The company has issued $60,000 of common stock. c. Net income for the year equals $60,000. d. Total revenues earned during the year equal $60,000.

Q: Below are incomplete financial statements for Beasley, Incorporated. Calculate the missing amounts. Income Statement Statement of Stockholders Equity Revenues $ (a) Common Stock Retained Earnings Expenses: Beginning $25,000 $12,000 Salaries 8,000 Issuances (c) Delivery 7,000 Net income 5,000 Utilities 5,000 Dividends (d) Net income (b) Ending $30,000 $15,000 Balance Sheet Assets: Liabilities: Cash $15,000 Accounts payable 15,000 Supplies 7,000 Stockholders Equity: Prepaid rent (e) Common stock (g) Equipment 35,000 Retained earnings (h) Total assets (f) Total liabilities and stockholders equity (i)

Q: During its first five years of operations, Della Manufacturing reports net income and pays dividends as follows. Calculate the balance of retained earnings at the end of each year. Note that retained earnings will always equal $0 at the beginning of year 1.

Q: Given the information below about David Corporation, what was the amount of dividends the company paid in the current period? a. $140,000. b. $0. c. $30,000. d. $20,000.

Q: Given the information below about Thomas Corporation, what was the amount of dividends the company paid in the current period? Beginning retained earnings $54,000 Ending retained earnings $110,000 Decrease in cash $10,000 Net income $84,000 Change in stockholders equity $15,000 a. $13,000. b. $110,000. c. $28,000. d. $18,000.

Q: The ending Retained Earnings balance of Boomer Inc. decreased by $1.0 million from the beginning of the year. The company declared a dividend of $5.4 million during the year. What was the net income earned during the year? a. $7.5 million. b. $6.4 million. c. $4.4 million. d. $1.0 million.

Q: DW has an ending Retained Earnings balance of $51,100. If during the year DW paid dividends of $4,300 and had net income of $22,500, then what was the beginning Retained Earnings balance? a. $24,300. b. $32,900. c. $300. d. $69,300.

Q: Aikman Company has paid dividends of $2,410, $0, $1,570 and $1,060 over the first four years of the companys existence. If Retained Earnings after year four has an ending balance of $9,700, what is the average annual amount of net income (loss) over the past four years for Aikman? a. $3,685. b. $14,740. c. $840. d. $1,260.

Q: Nina Corp. had the following net income (loss) the first three years of operation: $7,100, ($1,600), and $3,600. If the Retained Earnings balance at the end of year three is $1,100, what was the total amount of dividends paid over these three years? a. $500. b. $0. c. $9,100. d. $8,000.

Q: Sooner Company has had a net income of $8,000, $5,000, $12,000, and $10,000 over the first four years of the companys existence. If the average annual amount of dividends paid over the last four years is $3,000, what is the ending retained earnings balance? a. $47,000. b. $35,000. c. $23,000. d. $7,000.

Q: Use the following appropriate amounts to calculate net income: Revenues, $12,000; Liabilities, $5,000; Expenses, $4,000; Assets, $19,000; Dividends, $4,000. a. $6,000. b. $8,000. c. $4,000. d. $14,000.

Q: Match the attestation standard with the generally accepted auditing standard that is most similar in nature. 1. Online Privacy The system is protected against unauthorized access (both physical and logical) 2. Security The system is available for operation and use as committed or agreed 3. Availability System processing is complete, accurate, timely, and authorized 4. Confidentiality Personal information is collected, used, retained, and disclosed in conformity with the commitments in the entity's privacy notice and with criteria set forth in Generally Accepted Privacy Principles issued by the AICPAu2215CICA 5. Processing integrity Information designated as private is protected as committed or agreed

Q: Match the attestation standard with the generally accepted auditing standard that is most similar in nature. 1. The practitioner must state the practitioner's conclusion about the subject matter or the assertion in relation to the criteria against which the subject matter was evaluated in the report The auditor must have adequate technical training and proficiency to perform the audit 2. The practitioner must state all of the practitioner's significant reservations about the engagement, the subject matter and, if applicable, the assertion related thereto in the report The auditor must exercise due professional care in the performance of the audit and the preparation of the report 3. The practitioner must adequately plan the work and must properly supervise any assistants The auditor must adequately plan the work and must properly supervise any assistants 4. The practitioner must have adequate technical training and proficiency in the attest function The auditor must state in the auditor's report whether the financial statements are presented in accordance with generally accepted accounting principles (GAAP) 5. The practitioner must exercise due professional care in the planning and performance of the engagement The auditor must either express an opinion regarding the financial statements, taken as a whole, or state that an opinion cannot be expressed, in the auditor's report

Q: Internal auditors fall into two primary categoriesu2015assurance services and consulting services. Briefly explain these two categories in relation to internal auditors.

Q: In your own words, describe how the Institute of Internal Auditors (IIA) defines internal auditing?

Q: A SysTrust engagement is conducted under which of the following sets of standards? A. AICPA. B. Review. C. Attestation. D. Audit.

Q: An entity's WebTrust seal is managed by A. The CPA who performed the service. B. The AICPA. C. A third-party service organization. D. The entity receiving the seal.

Q: This concept, while used by both internal and external auditors, is typically assessed quite differently for each. A. Competence. B. Objectivity. C. Integrity. D. Materiality.

Q: When engaged to compile the financial statements of a nonpublic entity, an accountant is required to possess a level of knowledge of the entity's accounting principles and practices. This requirement most likely will include obtaining a general understanding of the A. Stated qualifications of the entity's accounting personnel. B. Design of the entity's internal controls placed in operation. C. Risk factors relating to misstatements arising from illegal acts. D. Internal control awareness of the entity's senior management.

Q: Which set of standards was created by the AICPA to cover services relating to unaudited financial statements? A. Standards on Selective Audits and Review Services (SSARS). B. Statement on Auditing Standards (SAS). C. Statements on Compilation and Review Standards (SCRS). D. Statements on Standards for Accounting and Review Services (SSARS).

Q: During an engagement to review the financial statements of a nonpublic entity, an accountant becomes aware of a material departure from GAAP. If the accountant decides to modify the standard review report because management will not revise the financial statements, the accountant should A. Express negative assurance on the accounting principles that do not conform with GAAP. B. Disclose the departure from GAAP in a separate paragraph of the report. C. Issue an adverse or an "except for" qualified opinion, depending on materiality. D. Express positive assurance on the accounting principles that conform with GAAP.

Q: Jones Retailing, a nonpublic entity, has asked Winters, CPA, to compile financial statements that omit substantially all disclosures required by generally accepted accounting principles. Winters may compile such financial statements, provided the A. Reason for omitting the disclosures is explained in the engagement letter and acknowledged in the management representation letter. B. Financial statements are prepared on a comprehensive basis of accounting other than generally accepted accounting principles. C. Distribution of the financial statements is restricted to internal use only. D. Omission is not undertaken to mislead the users of the financial statements and is properly disclosed in the accountant's report.

Q: Which of the following represents the order from the least assurance to the most assurance provided for the types of services provided? A. Review, compilation, audit. B. Compilation, review, audit. C. Audit, review, compilation. D. Audit, compilation, review.

Q: A CPA's report on agreed-upon procedures related to management's assertion about an entity's compliance with specified requirements should contain A. A statement of limitations on the use of the report. B. An opinion about whether management's assertion is fairly stated. C. Negative assurance that control risk has not been assessed. D. An acknowledgement of responsibility for the sufficiency of the procedures.

Q: Statements on Standards for Accounting and Review Services (SSARS) require an accountant to report when the accountant has A. Typed client-prepared financial statements, without modification, as an accommodation to the client. B. Provided a client with a financial statement format that does not include dollar amounts, to be used by the client in preparing financial statements. C. Proposed correcting journal entries to be recorded by the client that change client-prepared financial statements. D. Generated, through the use of computer software, financial statements prepared in accordance with a comprehensive basis of accounting other than GAAP.

Q: Which of the following procedures is more likely to be performed in a review engagement of a nonpublic entity than in a compilation engagement? A. Gaining an understanding of the entity's business transactions. B. Making a preliminary assessment of control risk. C. Obtaining a representation letter from the chief executive officer. D. Assisting the entity in adjusting the accounting records.

Q: When an accountant compiles a nonpublic entity's financial statements that omit substantially all disclosures required by generally accepted accounting principles, the accountant should indicate in the compilation report that the financial statements are A. Restricted for internal use only by the entity's management. B. Not to be given to financial institutions for the purpose of obtaining credit. C. Compiled in conformity with a comprehensive basis of accounting other than generally accepted accounting principles. D. Not designed for those who are uninformed about the omitted disclosures.

Q: Which of the following would an accountant not need to know when conducting a compilation? A. The accounting principles and practices of the industry in which the entity operates. B. A general understanding of the nature of the entity's business transactions and the form of its accounting records. C. The accounting basis on which the financial statements are to be presented. D. The accountant would need to know all of the above when conducting a compilation.

Q: According to the Code of Professional Conduct, what response is appropriate when an accountant, who is not independent, performs a compilation of financial statements? A. The accountant should indicate in the last sentence of the report that he/she is not independent. B. The accountant should withdraw from the engagement. C. The accountant should express a disclaimer opinion on the compilation. D. The accountant should express an adverse opinion on the compilation.

Q: Which of the following is not an attestation standard? A. Sufficient evidence shall be obtained to provide a reasonable basis for the conclusion that is expressed in the report. B. The report shall identify the subject matter or assertion being reported on and state the character of the engagement. C. The work shall be adequately planned and assistants, if any, shall be properly supervised. D. A sufficient understanding of internal controls shall be obtained to plan the engagement.

Q: An attestation report should state that the use of the report is restricted to specified parties under all of the following circumstances except when: A. The criteria used to evaluate the subject matter are available only to specified parties. B. The report is an attest engagement to apply agreed-upon procedures. C. A written assertion on the subject matter of the report has not been provided by the responsible party. D. All of the above are circumstances that would dictate that the use of the report is restricted to specific parties.

Q: Trust Service principles cover A. Hardware design. B. Confidentiality. C. Software design. D. Physical protection of computer systems.

Q: The type of report issued under a PrimePlus assurance engagement is likely which of the following? A. Unqualified. B. Assurance. C. Audit. D. Agreed-upon procedures.

Q: Direct services offered under PrimePlus include all of the following except: A. Accounting for the client's income. B. Providing assurances about the quality of care. C. Supervising the client's investments. D. Arranging for payment of care.

Q: In providing PrimePlus services, a CPA is likely to perform all of the following functions except: A. Observe and report on the quality of care provided to older individuals. B. Directly receive income and pay bills and provide an accounting for these transactions. C. Directly evaluate the quality of health care services provided by physicians and other medical caregivers. D. Perform assurance-related procedures by inspecting logs or other evidence to support that contracted services have been provided.

Q: Which of the following is not an aspect of the assurances provided by a CPA WebTrust report? A. Product or service quality. B. System availability. C. Confidentiality. D. Processing integrity.

Q: The expectation that an internal auditor does not accept gifts that may impair judgment is based on the principle of A. Integrity. B. Objectivity. C. Confidentiality. D. Competency.