Intermediate Accounting Kieso 16e Test Bank 3.2
*101. The income statement of Dolan Corporation for 2017 included the following items:
Interest revenue $141,000
Salaries and wages expense 210,000
Insurance expense 21,200
The following balances have been excerpted from Dolan Corporation's balance sheets:
December 31, 2017 December 31, 2016
Interest receivable $18,200 $15,000
Salaries and wages payable 17,800 8,400
Prepaid insurance 2,200 3,000
The cash paid for insurance premiums during 2017 was
a. $19,000.
b. $18,200.
c. $22,000.
d. $20,400.
*102. Olsen Company paid or collected during 2017 the following items:
Insurance premiums paid $ 30,800
Interest collected 69,800
Salaries paid 280,400
The following balances have been excerpted from Olsen's balance sheets:
December 31, 2017 December 31, 2016
Prepaid insurance $ 2,400 $ 3,000
Interest receivable 7,400 5,800
Salaries and wages payable 24,600 21,200
The insurance expense on the income statement for 2017 was
a. $25,400.
b. $30,200.
c. $31,400.
d. $36,200.
*103. Olsen Company paid or collected during 2017 the following items:
Insurance premiums paid $ 30,800
Interest collected 69,800
Salaries paid 280,400
The following balances have been excerpted from Olsen's balance sheets:
December 31, 2017 December 31, 2016
Prepaid insurance $ 2,400 $ 3,000
Interest receivable 7,400 5,800
Salaries and wages payable 24,600 21,200
The interest revenue on the income statement for 2017 was
a. $56,600.
b. $68,200.
c. $71,400.
d. $83,000.
*104. Olsen Company paid or collected during 2017 the following items:
Insurance premiums paid $ 30,800
Interest collected 69,800
Salaries and wages paid 280,400
The following balances have been excerpted from Olsen's balance sheets:
December 31, 2017 December 31, 2016
Prepaid insurance $ 2,400 $ 3,000
Interest receivable 7,400 5,800
Salaries and wages payable 24,600 21,200
Salaries and wages expense on the income statement for 2017 was
a. $234,600.
b. $277,000.
c. $283,800.
d. $326,200.
*105. The Supplies account had a balance at the beginning of year 3 of $8,000 (before the reversing entry). Payments for purchases of supplies during year 3 amounted to $50,000 and were recorded as expense. A physical count at the end of year 3 revealed supplies costing $14,500 were on hand. Reversing entries are used by this company. The required adjusting entry at the end of year 3 will include a debit to:
a. Supplies Expense for $6,500.
b. Supplies for $6,500.
c. Supplies Expense for $43,500.
d. Supplies for $14,500.
*106. At the end of 2017, Drew Company made four adjusting entries for the following items:
1. Depreciation expense, $25,000.
2. Expired insurance, $2,200 (originally recorded as prepaid insurance.)
3. Interest payable, $6,000.
4. Rent receivable, $10,000.
In the normal situation, to facilitate subsequent entries, the adjusting entry or entries that may be reversed is (are)
a. Entry No. 3 only.
b. Entry No. 4 only.
c. Entry No. 3 and No. 4.
d. Entry No. 2, No. 3 and No. 4.
*107. Garcia Corporation received cash of $60,000 on August 1, 2017 for one year's rent in advance and recorded the transaction with a credit to Rent Revenue. The December 31, 2017 adjusting entry is
a. debit Rent Revenue and credit Unearned Rent Revenue, $25,000.
b. debit Rent Revenue and credit Unearned Rent Revenue, $35,000.
c. debit Unearned Rent Revenue and credit Rent Revenue, $25,000.
d. debit Cash and credit Unearned Rent Revenue, $35,000.
*108. Lopez Company received $18,000 on April 1, 2017 for one year's rent in advance and recorded the transaction with a credit to a nominal account. The December 31, 2017 adjusting entry is
a. debit Rent Revenue and credit Unearned Rent Revenue, $4,500.
b. debit Rent Revenue and credit Unearned Rent Revenue, $13,500.
c. debit Unearned Rent Revenue and credit Rent Revenue, $4,500.
d. debit Unearned Rent Revenue and credit Rent Revenue, $13,500.
*109. Gibson Company paid $24,000 on June 1, 2017 for a two-year insurance policy and recorded the entire amount as Insurance Expense. The December 31, 2017 adjusting entry is
a. debit Insurance Expense and credit Prepaid Insurance, $7,000.
b. debit Insurance Expense and credit Prepaid Insurance, $17,000.
c. debit Prepaid Insurance and credit Insurance Expense, $7,000
d. debit Prepaid Insurance and credit Insurance Expense, $17,000.
110. On September 1, 2017, Lowe Co. issued a note payable to National Bank in the amount of $1,500,000, bearing interest at 9%, and payable in three equal annual principal payments of $500,000. On this date, the bank's prime rate was 8%. The first payment for interest and principal was made on September 1, 2018. At December 31, 2018, Lowe should record accrued interest payable of
a. $45,000.
b. $40,000.
c. $30,000.
d. $25,000.
111. Eaton Co. sells major household appliance service contracts for cash. The service contracts are for a one-year, two-year, or three-year period. Cash receipts from contracts are credited to Unearned Service Revenue. This account had a balance of $5,700,000 at December 31, 2017 before year-end adjustment. Service contract costs are charged as incurred to the Service Contract Expense account, which had a balance of $1,350,000 at December 31, 2017.
Service contracts still outstanding at December 31, 2017 expire as follows:
During 2018 $1,440,000
During 2019 1,710,000
During 2020 1,050,000
What amount should be reported as Unearned Service Revenue in Eaton's December 31, 2017 balance sheet?
a. $4,350,000.
b. $4,200,000.
c. $2,850,000.
d. $1,500,000.
None, IMA: Reporting, IFRS: None
112. In November and December 2017, Lane Co., a newly organized magazine publisher, received $75,000 for 1,000 three-year subscriptions at $25 per year, starting with the January 2018 issue. Lane included the entire $75,000 in its 2017 income tax return. What amount should Lane report in its 2017 income statement for subscriptions revenue?
a. $0.
b. $4,166.
c. $25,000.
d. $75,000.
113. On June 1, 2017, Nott Corp. loaned Horn $1,600,000 on a 12% note, payable in five annual installments of $320,000 beginning January 2, 2018. In connection with this loan, Horn was required to deposit $5,000 in a noninterest-bearing escrow account. The amount held in escrow is to be returned to Horn after all principal and interest payments have been made. Interest on the note is payable on the first day of each month beginning July 1, 2017. Horn made timely payments through November 1, 2017. On January 2, 2018, Nott received payment of the first principal installment plus all interest due. At December 31, 2017, Nott's interest receivable on the loan to Horn should be
a. $0.
b. $16,000.
c. $32,000.
d. $48,000.
114. Included in Allen Corp.'s balance sheet at June 30, 2018 is a 10%, $4,000,000 note payable. The note is dated October 1, 2016 and is payable in three equal annual payments of $2,000,000 plus interest. The first interest and principal payment was made on October 1, 2017. In Allen's June 30, 2018 balance sheet, what amount should be reported as accrued interest payable for this note?
a. $450,000.
b. $300,000.
c. $150,500.
d. $100,000.
115. Colaw Co. pays all salaried employees on a biweekly basis. Overtime pay, however, is paid in the next biweekly period. Colaw accrues salaries expense only at its December 31 year end. Data relating to salaries earned in December 2017 are as follows:
Last payroll was paid on 12/26/17, for the 2-week period ended 12/26/17.
Overtime pay earned in the 2-week period ended 12/26/17 was $25,000.
Remaining work days in 2017 were December 29, 30, 31, on which days there was no overtime.
The recurring biweekly salaries total $450,000.
Assuming a five-day workweek, Colaw should record a liability at December 31, 2017 for accrued salaries of
a. $135,000.
b. $160,000.
c. $270,000.
d. $295,000.
116. Tolan Corp.'s trademark was licensed to Eddy Co. for royalties of 15% of sales of the trademarked items. Royalties are payable semiannually on March 15 for sales in July through December of the prior year, and on September 15 for sales in January through June of the same year. Tolan received the following royalties from Eddy:
March 15 September 15
2016 $10,000 $15,000
2017 12,000 19,000
Eddy estimated that sales of the trademarked items would total $60,000 for July through December 2017. In Tolan's 2017 income statement, the royalty revenue should be
a. $28,000.
b. $31,000.
c. $40,000.
d. $41,000.
117. At December 31, 2017, Sue’s Boutique had 1,500 gift certificates outstanding, which had been sold to customers during 2017 for $60 each. Sue’s operates on a gross profit of 60% of its sales. What amount of revenue pertaining to the 1,000 outstanding gift certificates should be deferred at December 31, 2017?
a. $0.
b. $36,000.
c. $54,000.
d. $90,000.
*118. Compared to the accrual basis of accounting, the cash basis of accounting overstates income by the net increase during the accounting period of the
Accounts Receivable Accrued Expenses Payable
a. No No
b. No Yes
c. Yes No
d. Yes Yes
*119. Gregg Corp. reported revenue of $1,650,000 in its accrual basis income statement for the year ended June 30, 2018. Additional information was as follows:
Accounts receivable June 30, 2017 $400,000
Accounts receivable June 30, 2018 530,000
Uncollectible accounts written off during the fiscal year 15,000
Under the cash basis, Gregg should report revenue of
a. $1,235,000.
b. $1,250,000.
c. $1,505,000.
d. $1,535,000.
*120. Jim Yount, M.D., keeps his accounting records on the cash basis. During 2018, Dr. Yount collected $390,000 from his patients. At December 31, 2017, Dr. Yount had accounts receivable of $40,000. At December 31, 2018, Dr. Yount had accounts receivable of $70,000 and unearned revenue of $10,000. On the accrual basis, how much was Dr. Yount's patient service revenue for 2018?
a. $350,000.
b. $410,000.
c. $420,000.
d. $430,000.
*121. The following information is available for Ace Company for 2017:
Disbursements for purchases $1,560,000
Increase in trade accounts payable 100,000
Decrease in merchandise inventory 40,000
Cost of goods sold for 2017 was
a. $1,700,000.
b. $1,620,000.
c. $1,500,000.
d. $1,420,000.
