PreAssessment Intermediate
Accounting 2 D249 questions and
answers
A subscriber pays a magazine publisher $240 for a one-year
magazine subscription on April 30. The magazines will be delivered
electronically on the first day of each of the next 12 months. The
magazine processes the payment and receives the $240 cash
transfer immediately.
How would the magazine publisher record this transaction on April
30?
D: Cash $240
C: Unearned subscription revenue $240
A local retailer selling general merchandise collects sales taxes for
the city and state. The city sales tax is 4%, and the state sales tax is
2%. The retailer remits sales tax to the city and state on the fifth
day of the month following the month of sale, so all June sales
would be paid on July 5.
If the retailer sold $250,000 of general merchandise in February and
$240,000 in March, what would the balance of the current liability in
the sales tax payable account be as of March 31?
Sales x tax % = $14,400
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A company has the following long-term debt:
Bonds: $10,000,000 maturing in two years
Serial bonds: outstanding balance $8,000,000 with $1,000,000
maturing in each of the next eight years
Which amount of the long-term debt should be presented as a
current liability?
$1,000,000
A company has a possible favorable outcome in pending litigation
against a competitor for patent infringement in the amount of
$20,000,000. Lawyers assess the probability of success at 75% and
the likely award to be $8,000,000. The company estimates that it
could probably collect $7,000,000 of the award from the defendant.
How should the company report the litigation?
The gain contingency would not be reported (possible gains not
reported)
A company has taken a $30,000 loan from a bank to perform needed
renovations. The company must repay the borrowed funds in ten
months with 5% interest.
Which entry should the company use to record the payment at
maturity?
Loan x interest x mo./12
D: loan payable $30,000
D: interest expense $1,250
C: cash $31,250
A company reports its year-end balance sheet as follows:
Cash: $10,000
Short-term investments: $25,000
Accounts receivable: $49,000
, Inventory: $120,000
Property, plan, and equipment, net: $240,000
Long-term investments: $30,000
Accounts payable: $25,000
Sales tax payable: $7,000
Accrued liabilities: $9,000
Current portion of long-term debt: $13,000
Customer deposits: $10,000
Long-term debt: $130,000
Stockholder's equity: $280,000
Which amount should be included as current liabilities on the
balance sheet?
AP + Sales Tax + Accrued + Current portion + Customer deposits
$64,000
An accountant is reviewing a high probability gain contingency to
determine if it should be recorded in the financial statements.
How should this item be treated in the financial statements?
it does not need to be recorded, but it should be disclosed.
A company issues $10,000,000 in 20-year bonds at a 5% interest
rate, paid annually. On the date of issue, the bonds sold for
$9,500,000.At which value were the bonds issued?
Discount
Company A has a debt to assets ratio of 1.7. Company B has a debt
to assets ratio of 1.2.
What can be concluded when comparing these two companies?
Total debt (liabilities)/ Total asset
Higher ratio = more debt = harder to pay obligations
Company A is at greater risk of meeting maturing obligations.
A company reports a times interest earned ratio of 6.
What will be the impact to the company if interest expense
increases (if all other components remain the same)?
Accounting 2 D249 questions and
answers
A subscriber pays a magazine publisher $240 for a one-year
magazine subscription on April 30. The magazines will be delivered
electronically on the first day of each of the next 12 months. The
magazine processes the payment and receives the $240 cash
transfer immediately.
How would the magazine publisher record this transaction on April
30?
D: Cash $240
C: Unearned subscription revenue $240
A local retailer selling general merchandise collects sales taxes for
the city and state. The city sales tax is 4%, and the state sales tax is
2%. The retailer remits sales tax to the city and state on the fifth
day of the month following the month of sale, so all June sales
would be paid on July 5.
If the retailer sold $250,000 of general merchandise in February and
$240,000 in March, what would the balance of the current liability in
the sales tax payable account be as of March 31?
Sales x tax % = $14,400
Previous
Play
Next
Rewind 10 seconds
Move forward 10 seconds
Unmute
0:00
/
,0:15
Full screen
Brainpower
Read More
A company has the following long-term debt:
Bonds: $10,000,000 maturing in two years
Serial bonds: outstanding balance $8,000,000 with $1,000,000
maturing in each of the next eight years
Which amount of the long-term debt should be presented as a
current liability?
$1,000,000
A company has a possible favorable outcome in pending litigation
against a competitor for patent infringement in the amount of
$20,000,000. Lawyers assess the probability of success at 75% and
the likely award to be $8,000,000. The company estimates that it
could probably collect $7,000,000 of the award from the defendant.
How should the company report the litigation?
The gain contingency would not be reported (possible gains not
reported)
A company has taken a $30,000 loan from a bank to perform needed
renovations. The company must repay the borrowed funds in ten
months with 5% interest.
Which entry should the company use to record the payment at
maturity?
Loan x interest x mo./12
D: loan payable $30,000
D: interest expense $1,250
C: cash $31,250
A company reports its year-end balance sheet as follows:
Cash: $10,000
Short-term investments: $25,000
Accounts receivable: $49,000
, Inventory: $120,000
Property, plan, and equipment, net: $240,000
Long-term investments: $30,000
Accounts payable: $25,000
Sales tax payable: $7,000
Accrued liabilities: $9,000
Current portion of long-term debt: $13,000
Customer deposits: $10,000
Long-term debt: $130,000
Stockholder's equity: $280,000
Which amount should be included as current liabilities on the
balance sheet?
AP + Sales Tax + Accrued + Current portion + Customer deposits
$64,000
An accountant is reviewing a high probability gain contingency to
determine if it should be recorded in the financial statements.
How should this item be treated in the financial statements?
it does not need to be recorded, but it should be disclosed.
A company issues $10,000,000 in 20-year bonds at a 5% interest
rate, paid annually. On the date of issue, the bonds sold for
$9,500,000.At which value were the bonds issued?
Discount
Company A has a debt to assets ratio of 1.7. Company B has a debt
to assets ratio of 1.2.
What can be concluded when comparing these two companies?
Total debt (liabilities)/ Total asset
Higher ratio = more debt = harder to pay obligations
Company A is at greater risk of meeting maturing obligations.
A company reports a times interest earned ratio of 6.
What will be the impact to the company if interest expense
increases (if all other components remain the same)?
