Realistic Company purchased a new truck on January 1, 20X1. The truck cost $20,000, has a four-year life, and a $4,000 residual value. The company has a December 31 year end. If Realistic Company depreciates the truck by the straight-line method, how much should Realistic report as the book value of the truck at the end of 20X3?

Realistic Company purchased a new truck on January 1, 20X1. The truck cost $20,000, has a four-year life, and a $4,000 residual value. The company has a December 31 year end. If Realistic Company depreciates the truck by the straight-line method, how much should Realistic report as the book value of the truck at the end of 20X3?

a. $1,600
b. $4,000
c. $8,000
d. $16,000
e. $15,000

Answer: C

The trial balance:

The trial balance:

a. Is a formal financial statement.
b. Is used to prove that there are no errors in the journal or ledger.
c. Provides a listing of every account in the chart of accounts.
d. Provides a listing of the balance of each ledger account.
e. None of these

Answer: D

The proper journal entry to record Ransom Company's billing of clients for $500 of services rendered is:

The proper journal entry to record Ransom Company's billing of clients for $500 of services rendered is:

a. Dr. Cash 500
Cr. Accounts Receivable 500
b. Dr. Accounts Receivable 500
Cr. capital Stock 500
c. Dr. Accounts Receivable 500
Cr. Service Revenue 500
d. Dr. Cash 500
Cr. Service Revenue 500
e. None of these

Answer: C

Of the following account types, which would be increased by a debit?

Of the following account types, which would be increased by a debit?

a. Liabilities and expenses.
b. Assets and equity.
c. Assets and expenses.
d. Equity and revenues.
e. None of these

Answer: C

Hefty Company wants to know the effect of different inventory methods on financial statements. Given below is information about beginning inventory and purchases for the current year.

Hefty Company wants to know the effect of different inventory methods on financial statements. Given below is information about beginning inventory and purchases for the current year.

January 2 Beginning Inventory: 500 units at $3.00
April 7 Purchased : 1,100 units at $3.20
June 30 Purchased : 400 units at $4.00
December 7 Purchased : 1,600 units at $4.40
Sales during the year were 2,700 units at $5.00. If Hefty used the periodic LIFO method,
cost of goods sold would be:


a. $2,780
b. $3,960
c. $9,700
d. $10,880
e. $10,000

Answer: D

Inventory accounts should be classified in which section of a balance sheet?

Inventory accounts should be classified in which section of a balance sheet?

a. Current assets
b. Investments
c. Intangible assets
d. Tangible assets
e. Non-current assets

Answer: A

Flynn Company uses an allowance method for recording uncollectible. At the due date of that account receivable, Flynn determined that $4,000 due from Mitchell will not be collected and should be write off. The entry Flynn should record to write off the Mitchell account is:

Flynn Company uses an allowance method for recording uncollectible. At the due date of that account receivable, Flynn determined that $4,000 due from Mitchell will not be collected and should be write off. The entry Flynn should record to write off the Mitchell account is:

a. Dr. Uncollectible Accounts Expense 4,000
Cr. Accounts Receivable 4,000
b. Dr. revenue 4,000
Cr. Accounts Receivable 4,000
c. Dr. Uncollectible Accounts Expense 4,000
Cr. Allow. for Uncollectible Accounts 4,000
d. Dr. Allow. for Uncollectible Accounts 4,000
Cr. Accounts Receivable 4,000
e. None of these

Answer: D

Branz Company had credit sales during the current year which amounted to $700,000. Historically, 3% of credit sales are uncollectible. If Branz uses the allowance method of recording uncollectible accounts, a proper journal entry for the year would be:

Branz Company had credit sales during the current year which amounted to $700,000. Historically, 3% of credit sales are uncollectible. If Branz uses the allowance method of recording uncollectible accounts, a proper journal entry for the year would be:

a. Dr. Accounts Receivable 21,000
Cr. Allow. for Uncollectible Accounts 21,000
b. Dr. Uncollectible Accounts Expense 21,000
Cr. Accounts Receivable 21,000
c. Dr. Uncollectible Accounts Expense 21,000
Cr. Allow. for Uncollectible Accounts 21,000
d. Dr. Allow. for Uncollectible Accounts 21,000
Cr. Accounts Receivable 21,000
e. None of these

Answer: C

Taylor Company uses the direct write-off method of recording uncollectible accounts receivable. Recently, a customer informed Taylor that he would be unable to pay $300 owed to Taylor. Taylor's proper journal entry to reflect this event would be:

Taylor Company uses the direct write-off method of recording uncollectible accounts receivable. Recently, a customer informed Taylor that he would be unable to pay $300 owed to Taylor. Taylor's proper journal entry to reflect this event would be:

a. Dr. Uncollectible Accounts Expense 300
Cr. Allowance. for Uncollectible Accounts 300
b. Dr. Allowance. for Uncollectible Accounts 300
Cr. Accounts Receivable 300
c. Dr. Uncollectible Accounts Expense 300
Cr. Accounts Receivable 300
d. Dr. revenue 300
Cr. Accounts Receivable 300
e. None of these

Answer: C

Adjusting depreciation expense of fixed asset at $8,000. Recording this transaction:

Adjusting depreciation expense of fixed asset at $8,000. Recording this transaction:

a. Debit depreciation $8,000 and credit accumulated depreciation expense $,8000
b. Debit depreciation expense $8,000 and credit accumulated depreciation expense $,8000
c. Debit depreciation expense $8,000 and credit fixed asset $,8000
d. Debit depreciation expense $8,000 and credit accumulated asset $,8000
e. None of these

Answer: B

Provide descriptions for this transaction: Debit unearned revenue $8,000 and credit revenue $8,000

Provide descriptions for this transaction:
Debit unearned revenue $8,000 and credit revenue $8,000

a. Received payment in advance from customers $8,000
b. Paid in advance for supplies by cash $8,000
c. Adjusting expense at the end of period $8,000
d. Adjusting unearned revenue at the end of period $8,000
e. None of these

Answer: D

Provide descriptions for this transaction: Debit unearned revenue $8,000 and credit revenue $,8000

Provide descriptions for this transaction:
Debit unearned revenue $8,000 and credit revenue $,8000

a. Received payment in advance from customers $8,000
b. Paid in advance for supplies by cash $8,000
c. Adjusting expense at the end of period $8,000
d. Adjusting unearned revenue at the end of period $8,000
e. None of these




Answer: D

Provide descriptions for this transaction: Debit Cash $8,000 and credit Unearned revenue $,8000

Provide descriptions for this transaction:
Debit Cash $8,000 and credit Unearned revenue $,8000

a. Received payment in advance from customers by cash $8,000
b. Paid in advance for supplies by cash $8,000
c. Adjusting expense at the end of period $8,000
d. Adjusting unearned revenue at the end of period $8,000
e. None of these

Answer: A

Provide descriptions for this transaction: Debit Cash $8,000 and credit Unearned revenue $,8000

Provide descriptions for this transaction: Debit Cash $8,000 and credit Unearned revenue $,8000

a. Received payment in advance from customers by cash $8,000
b. Paid in advance for supplies by cash $8,000
c. Adjusting revenue at the end of period $8,000
d. Adjusting unearned revenue at the end of period $8,000
e. None of these



Answer: A

Provide descriptions for this transaction: Debit insurance expense $8,000 and credit Insurance - prepaid expense $,8000

Provide descriptions for this transaction: Debit insurance expense $8,000 and credit Insurance - prepaid expense $,8000

a. Paid insurance fee by cash $8,000
b. Adjusting prepaid expense at the end of period $8,000
c. Arrange insurance contract on credit $8,000
d. Arrange inventory contract by cash $8,000
e. None of these

Answer: B

Provide descriptions for this transaction: Debit inventory $8,000 and credit cash $,8000

Provide descriptions for this transaction: Debit inventory $8,000 and credit cash $,8000

a. Buying inventory by cash $8,000
b. Buying inventory on credit $8,000
c. Arrange inventory contract on credit $8,000
d. Arrange inventory contract by cash $8,000
e. None of these

Answer: A

Provide descriptions for this transaction: Debit inventory $8,000 and credit liability $,8000

Provide descriptions for this transaction: Debit inventory $8,000 and credit liability $,8000

a. Buying inventory by cash $8,000
b. Buying inventory on credit $8,000
c. Arrange inventory contract on credit $8,000
d. Arrange inventory contract by cash $8,000
e. None of these

Answer: B

Provide descriptions for this transaction: Debit inventory $8,000 and credit liability $,8000

Provide descriptions for this transaction: Debit inventory $8,000 and credit liability $,8000

a. Buying inventory by cash $8,000
b. Buying inventory on credit $8,000
c. Arrange inventory contract on credit $8,000
d. Arrange inventory contract by cash $8,000
e. None of these

Answer: B

Provide descriptions for this transaction: Debit office supplies $8,000 and credit liability $,8000

Provide descriptions for this transaction: Debit office supplies $8,000 and credit liability $,8000

a. Buying office supplies by cash $8,000
b. Buying office supplies on credit $8,000
c. Arrange office supplies contract on credit $8,000
d. Arrange office supplies contract by cash $8,000
e. None of these




Answer: B

Provide descriptions for this transaction: Debit office supplies $2,000 and credit liability $,2000

Provide descriptions for this transaction: Debit office supplies $2,000 and credit liability $,2000

a. Buying office supplies by cash $2,000
b. Buying office supplies on credit $2,000
c. Arrange office supplies contract on credit $2,000
d. Arrange office supplies contract by cash $2,000
e. None of these

Answer: B