1. Sellers allow customers to use credit cards:
To avoid having to evaluate a customer’s credit standing for each sale.
To lessen the risk of extending credit to customers who cannot pay.
To speed up receipt of cash from the credit sale.
To increase total sales volume.
All of these.
2. A company has net sales of $900,000 and average accounts receivable of $300,000. What is its accounts receivable turnover for the period?
3. Land is not subject to depreciation because it has an unlimited life. This means that items which increase the usefulness of the land such as parking lots are not depreciated.
4. Salvage value is an estimate of an asset’s value at the end of its benefit period.
5. A potential lawsuit claim is recorded when the claim can be reasonably estimated and it is reasonably possible.
6. Advance ticket sales totaling $6,000,000 cash would be recognized as follows:
Debit Sales, credit Unearned Revenue.
Debit Unearned Revenue, credit Sales.
Debit Cash, credit Unearned Revenue.
Debit Unearned Revenue, credit Cash.
Debit Cash, credit Revenue.
7. FUTA requires employers to pay a federal unemployment tax on the first $7,000 in salary or wages paid to each employee.
8. An employee earned $47,000 during the year working for an employer. The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%. The employee’s annual FICA taxes amount is:
Zero, since the employee’s pay exceeds the FICA limit.
9. A company had a beginning balance in retained earnings of $43,000. It had net income of $6,000 and paid out cash dividends of $5,625 in the current period. The ending balance in retained earnings equals:
10. Smith, West, and Krug form a partnership. Smith contributes $180,000, West contributes $150,000, and Krug contributes $270,000. Their partnership agreement calls for the income or loss division to be based on the ratio of capital invested. If the partnership reports income of $175,000 for its first year, what amount of income is credited to Krug’s capital account?
11. Mutual agency means
Creditors can apply their claims to partners’ personal assets.
Partners are taxed on partnership withdrawals.
All partners must agree before the partnership can act.
The partnership has a limited life.
A partner can commit or bind the partnership in any contract within the scope of the partnership business.
12. Owners of preferred stock often do not have:
Ownership rights to assets of the corporation.
Preference to dividends.
The right to sell their stock on the open market.
Preference to assets at liquidation.
13. A company issued 60 shares of $100 par value stock for $7,000 cash. The total amount of paid-in capital is:
14. Changes in accounting estimates are accounted for in current and future periods.
15. Rice, Hepburn, and DiMarco formed a partnership with Rice contributing $60,000, Hepburn contributing $50,000 and DiMarco contributing $40,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $75,000 for its first year of operation, what amount of income (rounded to the nearest thousand) would be credited to DiMarco’s capital account? (show all work)